Case at a Glance
A 39-year-old construction businessman died in a highway collision with a truck in Odisha in 2018. The Tribunal assessed his income from the last income tax return at ₹15 lakh a year; the High Court instead averaged two returns and cut the award by about ₹39 lakh. Settling how income is to be assessed from ITRs, the Supreme Court held that for salaried persons the previous year’s ITR suffices, while for the self-employed the average of up to the previous three years’ ITRs is the reference point, read with the nature and growth of the business. It fixed income at ₹14 lakh and enhanced the compensation to ₹1,97,81,505.
On 29 May 2018, Manoranjan Pandey, aged 39, was driving from Behrampur to Bhubaneswar when a truck struck his vehicle near Kaliabali Chakka on the National Highway; he died during treatment. An FIR was registered at Chamakhandi Police Station under Sections 279, 337, 338 and 304-A IPC. His legal representatives claimed ₹2,25,00,000 under Section 166 of the Motor Vehicles Act, 1988, stating that he ran a construction business earning ₹15,00,000 a year and was the sole breadwinner.
On 24 February 2023 the MACT, Behrampur awarded ₹2,27,00,064 with 6% interest, taking income of ₹15,00,000 from the ITR for assessment year 2018–19, a one-third deduction and a multiplier of 16. On 25 April 2024 the High Court, in MACA No. 452 of 2023, averaged two ITRs to take income at ₹13,33,226, applied a multiplier of 15 and reduced the award to ₹1,87,75,150. The Supreme Court appointed senior counsel J.R. Midha and counsel Salil Paul as amici curiae.
The Key Question Before the Court
In computing a deceased person’s annual income in a motor accident claim, should the Tribunal use the previous year’s ITR or an average of two or three years’ returns?
Salaried vs Self-Employed: Different Yardsticks for Income
Reiterating that the object is “just and fair compensation” and that there can be “no hard and fast formula” for computing annual income, the Court drew on National Insurance Co. Ltd. v. Pranay Sethi, (2017) 10 SC CK 0044, Reshma Kumari v. Madan Mohan, (2013) 04 SC CK 0079, ICICI Lombard General Insurance Co. Ltd. v. Ajay Kumar Mohanty, (2018) 03 SC CK 0008, Anant v. Pratap, (2018) 08 SC CK 0051, United India Insurance Co. Ltd. v. Satinder Kaur, (2020) 06 SC CK 0036, Rajwati alias Rajjo v. United India Insurance Co. Ltd., (2022) 12 SC CK 0024 and V. Pathmavathi v. Bharthi Axa General Insurance Co. Ltd., (2026) 02 SC CK 1756
For salaried persons, it held, the previous year’s ITR is sufficient, since the effect of promotions is reflected in that year’s return. For self-employed persons, the average of ITRs for up to the previous three years is the reference point, but the Tribunal must also consider the nature of the business, its growth pattern and potential, negative income in early years and other relevant factors. ITRs filed after death may also be considered if supported by financial statements. Applying this, the Court fixed income at ₹14,00,000, added 40% towards future prospects, deducted one-third for personal expenses and applied a multiplier of 15, arriving at ₹1,96,00,005 for loss of income.
What the Court Actually Held
- For a salaried deceased, the previous year’s ITR is ordinarily sufficient to assess annual income.
- For a self-employed deceased, the average of ITRs for up to the previous three years is the reference point, along with the nature, growth pattern and potential of the business and any early-year losses.
- ITRs filed after death can be considered if backed by financial statements.
- Income was fixed at ₹14,00,000 and total compensation enhanced to ₹1,97,81,505 (loss of income ₹1,96,00,005; loss of estate and funeral expenses ₹18,150 each; consortium ₹1,45,200), with interest on the enhanced amount as awarded by the Tribunal, to be paid directly into the claimants’ bank account within four weeks of receipt of account particulars.
Why This Judgment Matters
- It resolves a recurring dispute in high-value MACT claims involving business owners and professionals.
- It gives Tribunals a structured yet flexible method, avoiding mechanical reliance on a single year’s return.
- It recognises post-death ITRs where supported by accounts, which helps families whose returns were pending.
What Should Advocates Take Away From the Judgment?
For Claimants
- For a self-employed earner, file ITRs for the last three years along with balance sheets and profit-and-loss statements.
- Show the growth trajectory of the business — the Court said growth pattern and potential are relevant.
- If returns were filed after the death, support them with financial statements.
For Counsel
- Distinguish clearly whether the deceased was salaried or self-employed; the yardstick differs.
- Challenge awards that average returns mechanically without considering business growth or early-year losses.
- Two connected non-reportable decisions of the same date (Rajani v. Mukesh and Rekha v. Dinesh Porwal) applied these principles and can be cited for illustration.
Key Takeaways
- Salaried: previous year’s ITR.
- Self-employed: average of up to three years’ ITRs, read with business growth and nature.
- Post-death ITRs count if supported by financial statements.
- Compensation was enhanced to ₹1,97,81,505.
Frequently Asked Questions
How is a businessman’s income calculated in a MACT claim?
According to this judgment, the average of income tax returns for up to the previous three years is the reference point, considered together with the nature of the business, its growth pattern and potential, and any early-year losses.
Can returns filed after the death be relied on?
Yes, if they are supported by financial statements.
What was the final award?
₹1,97,81,505, with interest on the enhanced amount as awarded by the Tribunal, payable directly to the claimants’ bank account.
Conclusion
Rashmirekha Tripathy brings much-needed clarity to how Tribunals should read income tax returns while assessing loss of dependency. By separating the salaried from the self-employed and insisting on a contextual reading of business income, the Supreme Court has made the computation both principled and fair.
Practical takeaway: In any MACT claim for a self-employed victim, place at least three years of ITRs and supporting accounts on record, and explain the business’s growth — this is now the reference point for income.
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