Section 85B

CHAPTER VII — INCOMES FORMING PART OF TOTAL INCOME ON WHICH NO INCOME-TAX IS PAYABLE

SECTION 85B — DEDUCTION IN RESPECT OF DIVIDENDS RECEIVED FROM CERTAIN FOREIGN COMPANIES (OMITTED)

Case Laws & Commentary (Income-tax Act, 1961 as amended by Finance Act, 2026)

STATUTORY POSITION (Income-tax Act, 1961, as in force)

Marginal heading (as originally enacted): Deduction In Respect Of Dividends Received From Certain Foreign Companies

81. to 85C. [Omitted by the Finance (No. 2) Act, 1967, w.e.f. 1-4-1968. Provisions of sections 81, 82, 83, 84, 85, 85A, 85B and 85C were incorporated from the same date in sections 80P, 80Q, 10(29), 80J (now omitted), 80K (now omitted), 80M (now omitted), 80N (now omitted) and 80-O, respectively.]

A. SECTION COMMENTARY

A.1 Original subject-matter (pre-1968 position)

Section 85B granted relief in respect of dividends received from certain foreign companies, as an incentive connected with overseas investment/earnings; it operated to reduce the tax burden on qualifying foreign-source dividend income.

A.2 Insertion and statutory history

Original provision was part of the Income-tax Act, 1961 (inserted in the mid-1960s).

A.3 Omission and migration of the provision

With effect from 1 April 1968 the provision was incorporated in section 80N ('deduction in respect of dividends received from certain foreign companies'). Section 80N was subsequently omitted (now omitted, as the bare Act records); the relief on foreign-source dividends was overtaken by later changes to the taxation of foreign income and by the double-taxation-relief mechanism.

A.4 Current status

Section 85B does not exist as a live operative provision of the Income-tax Act, 1961. The Chapter VII slot bears only the omission entry reproduced above. Its policy lives on in section 80N (and the provisions that have in turn succeeded it). For an assessment under the 1961 Act there is nothing to apply under section 85B itself; the analysis must proceed under the successor provision and the head of income to which the receipt belongs.

A.5 CA practitioner pointers

(1) Do not cite section 85B in a current return, computation, assessment or appeal — it has stood omitted since the date shown above and any reference to it is liable to be treated as a mistake. (2) Where the receipt in question is of the kind the old section addressed, frame the claim under the successor provision and satisfy its conditions. (3) When relying on older judgments decided on the omitted section, treat them as authority on the underlying concept only, and check that the successor provision has not altered the conditions on which the earlier ruling turned.

B. FA 2026 IMPACT NOTE

The Finance Act, 2026 does not revive or amend section 85B; the section remains omitted. FA 2026 makes no change to Chapter VII. (For completeness, the only live section of Chapter VII — section 86 — is also not amended by FA 2026.)

Transition note: the Income-tax Act, 2025 (which commences on 1 April 2026 and replaces the 1961 Act) does not re-enact this omitted provision under its old number; the relief, to the extent it still exists, is found in the corresponding deduction/exemption of the new Act.

C. CASE LAW

No case law subsists under section 85B as a live provision: it was omitted with effect from the date noted above, so no assessment is decided under it today. The provision was not carried into a single identifiable successor that has generated a settled body of authority of its own; any dispute on the underlying receipt is decided under the general charging provisions and the head of income to which it belongs. Consistent with the accuracy discipline of this treatise, no case is listed under this section.