Section 80-IA deduction must be computed from eligible business profits alone, without prior set-off of non-eligible losses.

Deduction under section 80-IA is to be computed by treating the eligible business as the only source of income for the relevant year. On a conjoint reading of sections 80-IA(7), 80A, 80AB and 80B(5), brought forward unabsorbed depreciation, losses, deductions and expenses of non-eligible business or other sources are not to be set off before determining the deduction. Only losses and allowances relating to the eligible business itself are relevant to the computation. The result is that the section 80-IA deduction is allowed with reference to the eligible business without prior adjustment of non-eligible business losses or depreciation.

---

---

Issues: Whether deduction under section 80-IA in respect of profits and gains derived from the eligible business was to be allowed before set-off or adjustment of brought forward unabsorbed depreciation and losses of the non-eligible business.

Analysis: Section 80-IA(7) contains a non obstante clause and prescribes a special mode for computing the quantum of deduction by treating the eligible business as the only source of income for the relevant year. On a conjoint reading of sections 80-IA(7), 80A, 80AB and 80B(5), the computation for section 80-IA purposes has to be confined to the eligible business itself. Losses, deductions, expenses and unabsorbed depreciation relating to non-eligible business or other sources are not to be adjusted before computing the deduction under section 80-IA, though losses and allowances relating to the eligible business itself are to be considered.

Conclusion: The deduction under section 80-IA is to be allowed with reference to the eligible business without prior adjustment of brought forward losses or unabsorbed depreciation of the non-eligible business. The finding is in favour of the assessee.

---