Section 80-IA deduction limits deeming fiction to computation, barring revival of earlier losses already set off.

Section 80-IA deduction is a profit-linked incentive, and the deeming fiction in sub-section (5) applies only to computing the eligible business's deduction for the relevant years. Earlier losses that have already been set off against other income cannot be reopened, notionally carried forward again, or adjusted a second time for recomputation of the deduction. The Court followed its earlier view and the Rajasthan High Court's reasoning, holding that the fiction is confined to its limited purpose and does not permit revival of absorbed losses. The resulting position favoured the assessee and rejected the Revenue's attempt to rework the deduction base.

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Issues: Whether the assessee was entitled to deduction under Section 80-IA of the Income-tax Act, 1961, and whether losses of earlier years, already set off against other income, could be notionally brought forward and adjusted again while computing the deduction.

Analysis: The deduction under Section 80-IA is a profit-linked incentive for an eligible business. For computing the quantum of deduction, sub-section (5) creates a deeming fiction that the eligible business is the only source of income for the relevant previous year and subsequent years, but that fiction is confined to the purpose for which it is enacted. Once losses of earlier years have already been absorbed against other income, they cannot be reopened or notionally carried forward again for recomputation of deduction under Section 80-IA. The earlier view of the Court and the Rajasthan High Court were followed, and no contrary reason or authority was shown to warrant a different view.

Conclusion: The assessee was entitled to the deduction, and the earlier set-off losses could not be notionally brought forward again; the answer was against the Revenue and in favour of the assessee.

Ratio Decidendi: For deduction under Section 80-IA, losses already set off in earlier years cannot be revived notionally, because the deeming fiction in sub-section (5) operates only for computing the quantum of deduction for the eligible business from the initial assessment year onward.

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