Motor Accident Claims - Tax Returns Can Be Accepted To Determine Income Only If They Are Appropriately Produced : Supreme Court

The Supreme Court, recently (on January 02), while deciding a motor accident compensation claim case, observed that monthly income could be fixed after taking into account the tax returns. However, the details of tax payment must be properly brought into evidence to enable the Tribunal/Court to calculate the income.

The Bench of Justices C.T Ravikumar and Sanjay Karol were deciding a batch of appeals preferred both by the insurer and the claimant. While the claimant prayed for the enhancement of compensation, the insurer pleaded for the reduction.

The brief facts were such that the claimant (also the appellant) lost her parents and younger brother in an accident. The offending vehicle insured with the respondent driven by its driver in a rash and negligent manner dashed against the stationary auto in which the deceased persons were travelling. The Tribunal granted compensation to the appellant which was enhanced by the High Court in an appeal. Dissatisfied with the amount, the appellant approached the Apex Court. However, the respondent sought a reduction of the amount.

The Court noted that the parents of the appellant were self-employed. For the purpose of evidence, the appellant had produced only the Xerox copies of the Income Tax Returns of her parents. Neither the Tribunal nor the High Court took the same as admissible evidence and made an assessment on their basis.

The Supreme Court did not interfere with this approach and said it was not legally improper. It reasoned that “Monthly income could be fixed taking into account the tax returns only if the details of payment of tax are appropriately brought into evidence so as to enable the Tribunal/Court to calculate the income in accordance with law.”

“The Tribunal could not be said to have committed any mistake in not accepting the xerox copies of the tax returns and virtually adopted guess work relying on the attending circumstances to fix the monthly income of the parents of the appellant for calculation purpose.,'' the Court said.

Moving forward, the Court also considered that, during computation, the High Court had failed to deduct one-third of the income towards personal expenses. The principle regarding this was already laid down by the Court in Sarla Verma and Ors. v. Delhi Transport Corporation & Anr., (2009) 6 SCC 121. However, at the same time, the Court also took into consideration that the High Court had not considered future prospects while calculating the income.

“There cannot be any doubt with respect to the position that in the case of self-employed persons too, fixation of monthly income, taking the factor of future prospects cannot be denied. The position is that, in the case of selfemployed persons below the age group of 40 years, 40% of the income assessed for fixation is grantable taking into account towards future prospects and in the case of persons within age group of 40 to 50 years an addition of 25% is grantable on that count, in terms of the decision in Pranay Sethi's case (supra).''

Based on this, the Court opined that even if the compensation is reworked, it might lower the amount but not in an exorbitant or excessive way. The Bench did not miss to record the fact that the appellant was only 14 years old when she lost the deceased persons. In a family of four persons, only she had survived. It also noted that the Motor Vehicles Act mandates grant of 'just compensation'.

On the above counts, the Court affirmed the enhanced compensation granted by the High Court and in the interest of justice it upheld the impugned judgment.

Case name: New India Assurance Co. Ltd. V. Sonigra Juhi Uttamchand., SLP (C) No. 30491 of 2018

Citation : 2025 LiveLaw (SC) 18

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