The Supreme Court has ruled that Income Tax Returns (ITR) filed after an accident or death can be considered while calculating compensation in motor accident claims, ensuring fairer payouts that reflect the deceased’s actual earning potential.
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NEW DELHI: In a landmark judgment that will impact motor accident compensation claims across India, the Supreme Court of India has ruled that Income Tax Returns (ITRs) filed after an accident or death can be considered when calculating compensation for motor accident claims. This ruling ensures that families are not penalized due to the timing of tax filings, potentially increasing the compensation they receive.
Background
The case originated from a fatal road accident on June 27, 2006, in which 32-year-old Rajendra Singh Gena lost his life after a collision caused by a truck. His family filed a claim under Section 166 of the Motor Vehicles Act, 1988, asserting that the deceased earned income from his transport business and agriculture.
- FY 2004-05: ₹84,000
- FY 2005-06: ₹1,26,000 (plus ₹60,000 agricultural income)
The Motor Accident Claims Tribunal (MACT) in Ajmer had only recognized the earlier income, citing doubts about the authenticity of the tax return filed after the accident. The Rajasthan High Court upheld this approach but enhanced other heads of compensation, resulting in a total award of ₹16,01,200.
Appellants’ Arguments
The deceased’s family argued before the Supreme Court that:
- The deceased’s higher income for 2005-06 should have been recognized.
- Agricultural income was ignored.
- The 10% increase for conventional heads, as prescribed in earlier precedents, was not applied.
- The interest awarded was inadequate.
Supreme Court’s Observations
The Bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh clarified the legal position regarding post-accident ITRs:
“To reject the Return on the sole ground of its submission after the date of accident cannot be legally sustained.”
While noting discrepancies in signatures on the 2005-06 return, the Court did not discard it outright. Instead, it emphasized that business profits are rarely static and often grow over time. Based on this principle, the Court recalculated the deceased’s income at ₹1,00,000 per year, reflecting realistic earning potential.
After reassessing the deceased’s income, the Supreme Court determined that his annual income should be considered ₹1,00,000. Taking into account a 40% addition for prospects, the income was effectively raised to ₹1,40,000. From this, one-fourth was deducted to account for personal expenses, resulting in a net annual dependency of ₹1,05,000. Applying a multiplier of 16, the compensation for loss of dependency was calculated at ₹16,80,000.
In addition, the Court awarded ₹2,29,900 under conventional heads, including funeral expenses, estate loss, and consortium benefits. This brought the total compensation awarded to ₹19,09,900, which the respondents were directed to deposit directly into the claimants’ bank account within four weeks.
The Court directed the respondents to deposit the amount directly into the claimants’ bank accounts within four weeks, while maintaining the previously awarded interest rate of 5%.
Case Title:
Sayar & Ors. v. Ramkaran & Ors.
Civil Appeal arising out of SLP(C) No. 24501/2025
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