(A) Motor Vehicles Act, 1988 — Ss. 166 and 168 — Compensation — Assessment of annual income — Income-tax Returns — Governing principles.
There is no rigid or universal formula for determining the annual income of a deceased or injured claimant on the basis of Income-tax Returns (ITRs). The paramount consideration under the Motor Vehicles Act is the award of just, fair and reasonable compensation. ITRs constitute an important statutory indicator of income but must be assessed in the light of the facts and circumstances of each case. (Paras 15–20).
(B) Motor Vehicles Act, 1988 — Compensation — Salaried employees — Assessment of income.
For salaried persons, ordinarily the Income-tax Return of the immediately preceding assessment year constitutes the appropriate basis for determining annual income. Where the deceased or claimant had recently received a promotion and the enhanced income is not reflected in the return, the Court may rely upon the promotion order and other corroborative financial material. (Para 18).
(C) Motor Vehicles Act, 1988 — Compensation — Self-employed persons and business income — Assessment of income.
In the case of self-employed persons or persons carrying on business, annual income should ordinarily be assessed with reference to the average income disclosed in the Income-tax Returns of the preceding three years. The Court must also consider surrounding circumstances including the nature of business, growth pattern, future potential, initial losses, geographical factors and other relevant circumstances affecting earning capacity. (Paras 19–20).
(D) Motor Vehicles Act, 1988 — Income-tax Returns filed after death or injury — Evidentiary value.
Where Income-tax Returns are filed after the death or injury of the claimant, the Court must scrutinise them with greater care. If supported by balance sheets and other financial records, such returns may be relied upon; otherwise, surrounding business circumstances become decisive in assessing true income. (Para 20).
(E) Motor Vehicles Act, 1988 — Compensation — Determination of business income — Judicial discretion.
Assessment of business income cannot rest upon a mechanical average of Income-tax Returns alone. The Court is empowered to determine a realistic annual income after considering the nature and potential of the business so as to ensure award of just compensation. (Paras 21–23).
(F) Motor Vehicles Act, 1988 — Compensation — Insurance Agent — Assessment of income.
In the case of an Insurance Agent whose income is performance-oriented, averaging Income-tax Returns beyond the previous three years is unjustified. Income should be assessed keeping in view the fluctuating nature of commission-based earnings and the average of the immediately preceding three years. (Paras 9–12 of Civil Appeal arising out of SLP(C) No. 3088 of 2025).
(G) Motor Vehicles Act, 1988 — Compensation — Self-employed trader — Income-tax Returns filed after death.
Where recent Income-tax Returns were filed after the death of the deceased and supporting financial records were unavailable, remand was considered inappropriate. Having regard to the available Income-tax Returns and the nature of the wholesale grocery business, the Court determined a reasonable annual income to ensure just compensation. (Paras 10–14 of Civil Appeal arising out of SLP(C) No. 7735 of 2025).
