Use ITRs to assess income in motor accident compensation cases: SC

The Supreme Court has laid down guidelines on how courts should determine the annual income of deceased victims in motor accident or injured claimants on the basis of Income Tax Returns. In a significant verdict aimed at bringing uniformity to motor accident compensation, the top court held that for salaried individuals, only the Income Tax Return (ITR) of the previous year will be sufficient for showcasing the annual income. However, where a promotion or salary revision had taken place shortly before the accident and was not fully reflected in the latest return, courts could also consider promotion letters and other corroborative financial records, it said.  
In case of self-employed persons, it held that the average income disclosed in ITRs for up to the previous three years should ordinarily serve as the reference point. The verdict then referred to scenarios which may lead to fluctuations in income of the deceased or injured self-employed victims and said these would include the nature of the business, growth pattern and impact of death on the business and potential growth of business. It also referred to negative income and any other relevant factor relating to the business that may affect the income of the accident victims. 
A bench of justices Sanjay Karol and N Kotiswar Singh on Wednesday held that there cannot be a rigid formula for computing annual income under the Motor Vehicles Act, but drew a clear distinction between salaried employees and self-employed persons for the purpose of assessing compensation based on their ITRs. Recognising conflicting approaches adopted by different courts across the country, the bench observed that while some courts relied only on the latest ITR, others averaged income reflected in returns for the preceding years, leading to inconsistent awards.
“The 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 also be taken into consideration,” it said. The judgment came while deciding an appeal filed by the family of a construction businessman, Rashmirekha Tripathy against Sriram General Insurance Company Ltd. The top court also enhanced the compensation payable to the claimants.