In the considered view of this Court, there can be no hard and fast formula for computing the annual income of a deceased person/claimant. 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. {Para 17}
18. We find force in the submission put forth by Mr. J.R Midha, learned senior counsel. There must be a bifurcation made between salaried individuals and self-employed individuals when it comes to assessment of annual income. In our view, for salaried individuals, only the ITR of the previous year will be sufficient for showcasing the annual income from salary. The reason for considering only the preceding year is that the financial impact of promotions is significant and may be reflected in the ITR for only that year. A situation may also arise whereby the deceased/claimant might not have completed a year in the promoted position before the accident or might not have filed ITR for such period. In such cases the Court concerned shall take reference to the promotion letter and other corroboratory financial statements.
19. When it comes to self-employed / individuals carrying out their own business, in our view, 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. There may also be a scenario where only one or two ITRs have been filed. Given such scenarios and the fluctuation of income in these professions, surrounding circumstances are also to be taken into consideration. These would include:
a) The nature of the business (including geographic location,
category etc.);
b) Growth pattern of the business and impact of death on the
business;
c) Potential growth of business (for instance certain
businesses are capital intensive at the outset and are
profitable at scale/in the future);
d) Negative income (certain businesses may require losses in
the initial years, which may not reflect the true financial
standing); and
e) Any other relevant factor relating to the business.
20. 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.
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. OF 2026
(Arising out of SLP(C) No. 27220 of 2024)
RASHMIREKHA TRIPATHY AND ANR. Vs THE BRANCH MANAGER (LEGAL CLAIMS), SRIRAM GENERAL INSURANCE COMPANY LIMITED AND ORS.
Author: SANJAY KAROL, J.
