Motor Vehicle Act, 1988 – s.166 – Compensation – Computation of annual income of the deceased victim on the basis of ITRs – Victim aged 39 years, sole breadwinner, running his own construction business, met with a road accident and succumbed to his injuries – Tribunal ascertained his income at Rs.15 lakhs pa considering his previous year’s ITR and awarded Rs.2.27 crores – However, the High Court reduced the compensation to Rs.1.87 crores taking the average of the previous two ITRs on record, instead of only the previous ITR – Correctness:
Held: ITRs being a statutory document are an important reference point when it comes to assessing one’s income, for the purposes of compensation under the Motor Vehicle Act – There must be a bifurcation made between salaried individuals and self-employed individuals when it comes to assessment of annual income – For salaried individuals, only the ITR of the previous year will be sufficient for showcasing the annual income from salary since the financial impact of promotions is significant and may be reflected in the ITR for only that year – When it comes to self-employed/individuals carrying out their own business, the average of the income specified in the ITRs of up to the previous three years is to be taken as a reference point for assessment of annual income from their business – Where only one or two ITRs have been filed, and there is fluctuation of income, surrounding circumstances-nature of the business; growth pattern of the business; impact of death on the business; potential growth of business; negative income, to be taken into consideration – Date when the ITRs are filed would also become a relevant consideration, as there may be scenarios where inflated income is showcased after death/injury – In these circumstances, the surrounding factors of the business would become more relevant – However, if sufficiently supported by financial statements, such ITRs may be taken into consideration – On facts, the appellants brought on record two ITRs for AY 2017-18 and AY 2018-19, and High Court took the average of these to assess the annual income of the deceased as Rs.13,33,226/- – No reference made to other factors relating to the nature of business – Thus, with a view to awarding just and fair compensation, his annual income is fixed as Rs.14,00,000/- – In view thereof, the compensation payable to the appellants would be Rs.1,97,81,505 – Impugned award modified accordingly. [Paras 17-23]
As published in the Supreme Court Reports, Supreme Court of India. Headnotes prepared by: Nidhi Jain. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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