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The Supreme Court on January 2, 2025, said the monthly income of a deceased in case of compensation under the Motor Vehicle Act can 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.

A bench of Justices C T Ravikumar (since retired) and Sanjay Karol also said that in the case of self-employed persons, fixation of monthly income, taking the factor of future prospects cannot be denied.

The court was dealing with four civil appeals filed by New India Assurance Co Ltd and Sonigra Juhi Uttamchand, the legal heir of her parents and a 10-year-old brother, all of whom had died after their stationary auto was hit by a van driven rashly and negligently.

In the case, the High Court had enhanced the compensation for the father’s death from Rs 14,78,000 to Rs 30,58,000 and for the mother’s death from Rs 13,33,936 to Rs 16,34,000. For the brother’s death, the compensation had been increased from Rs 2,55,000 to Rs 5,00,000.

The court noted that, while the Tribunal had deducted one-third of the income towards personal expenses for the deceased parents in its award, the High Court, without providing a specific reason, had not applied this deduction in its enhanced compensation.

"In that regard, according to us there cannot be any room for doubt with respect to the position that while calculating the quantum of compensation for death, deduction is bound to be effected towards personal and living expenses, this position was made clear by this Court in the decision in Sarla Verma and Ors Vs Delhi Transport Corporation & Anr (2009)," the bench said.

The insurer had argued that the High Court had erred by considering the deceased’s income on an assumption basis in the absence of proof. The bench observed that the parents of the appellant were self-employed and not salaried, as revealed from the records. It added that the appellant had only produced xerox copies of her parents’ Income Tax Returns for the financial years 2003 to 2007, which the Tribunal and the High Court had not admitted as evidence.

"Indisputably, the Tribunal as also the High Court did not take them as admissible evidence and make assessment on their basis. At the same time without placing reliance on the xerox copies of the Income Tax Returns, the Tribunal fixed the monthly income of her father as Rs 12,000 and that of her mother as Rs 8,000. The impugned judgment would reveal that the monthly income thus fixed in the case of the parents were slightly enhanced by the High Court and it in the case her of father was re-fixed as Rs 18,000 and in case of her mother as Rs 9,000," the bench said.

Court noted that the accident had occurred in 2007, with the father, a jeweler, aged 48, and the mother, aged 38, also reportedly running a jewelry shop. It found that the High Court’s enhancement of their monthly income was not excessive or without jurisdiction.

The bench concluded that the High Court’s decision to enhance compensation could not be legally faulted. However, it agreed with the insurer’s contention that one-third of the income should have been deducted towards personal expenses during the calculation of compensation.

"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. But finding that the monthly income so assessed was slightly on the lower side and taking into account various parameters, the High Court enhanced the monthly income in their cases, respectively as Rs 18,000 and Rs 9,000. Taking note of the year of the accident and the age of the deceased parents of the appellant, we do not think that the monthly income so refixed by the High Court is without jurisdiction or highly excessive," the bench said.

The court held the said approach could not be said to be legally improper or incorrect warranting an interference.

"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 bench said.

In the case, the court agreed with the contention of the insurance company that the High Court ought to have deducted one-third of the income towards personal expenses, while calculating the compensation by way of enhancement.

At the same time, the court agreed with the appellant’s grounds for enhanced compensation, particularly regarding the consideration of future prospects for self-employed persons.

"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 court said.

However, the court said re-working the compensation by making additions and deductions would result in lowering of the quantum though certainly not in a big way.

Taking into account the plight of the appellant who lost three family members, the bench said, "We are of the considered view that after taking into account all parameters, just compensation was assessed and granted by the High Court as per the impugned common judgment by way of enhancement, which cannot be said to be excessive or exorbitant."

In the name of correcting the law, the bench said, it would not be appropriate to interfere with justice done to the appellant by the High Court by granting enhanced compensation.

In the interest of justice, the enhanced compensation granted by the High Court as per the impugned judgment has to be maintained, the court said while dismissing all the appeals.

Case Title: New India Assurance Co Ltd Vs Sonigra Juhi Uttamchand