M/s. Oriental Insurance Company Limited vs G. Saraswathi & Ors.

All these appeals, preferred under Section 173 of Motor Vehicles Act, 1988 (for short, “the Act”), arise out of the very same award, dated 13.05.2014, passed in M.V.O.P. No.97 of 2010, by the Chairman, Motor Accident Claims Tribunal-cum-District Judge, Chittoor (“the Tribunal”), therefore, they are heard together and disposed of by this common judgment.

For the sake of convenience, the parties hereinafter are referred to as they were arrayed in the M.V.O.P. before the Tribunal.

M.A.C.M.A. No.3422 of 2014 is preferred by the claimants seeking enhancement of compensation. M.A.C.M.A. No.3230 of 2014 and M.A.C.M.A. No.343 of 2015 are preferred by the insurers of luggage auto bearing registration No.AP 03 U 8972 and Alto car bearing registration No.AP 03 4779, respectively, both involved in the accident, assailing the quantum of compensation.

Brief facts of the case are as follows:

The owner of luggage auto, 1^st respondent, filed written statement opposing the claim, inter alia, by pleading that the driver of said auto was not negligent and rather the driver of Alto car was responsible for the accident due to his sheer negligence. The quantum of compensation was also disputed to be excessive.

The insurer of luggage auto, 2^nd respondent, filed written statement denying the occurrence of accident and that the driver of auto was at fault and negligent in causing the accident. It was pleaded that as the accident occurred on account of head-on collision, the owner-cum-driver of Alto car and its insurer were alone liable for the compensation, besides the age, avocation, income of deceased were also disputed.

Owner of Alto car, i.e., 3^rd respondent, remained ex parte.

The insurer of Alto car, 4^th respondent, filed written statement as well as additional written statement denying that the accident had occurred on account of rash and negligent act of driver of luggage auto. Since charge-sheet was laid against the driver of luggage auto, the negligence was clearly attributable to the said driver, and hence the insurer of it was liable for the compensation. That apart, it was also pleaded that the insurance covering the Alto car did not cover the risk of inmates of car on account of non-payment of additional premium, therefore, no liability can be fastened on it.

Based on the aforesaid pleadings, the Tribunal has framed the following issues:

In support of the claim, PW.1 to PW.4 were examined and Exs.A1 to A28 were marked. For the insurer of luggage auto, RW.1 was examined, and Exs.B1 and B2 were marked. The rest of respondents adduced neither oral nor documentary evidence.

The Tribunal, on appreciation of evidence on record, answered first issue in affirmative, holding that on account of collision of two vehicles i.e., Alto car and luggage auto, the accident occurred and that the drivers of both vehicles were negligent. The Tribunal then proceeded to determine the quantum of compensation. The deceased was having business interests in at least five agencies, three of them were proprietary concerns and two of them were partnership firms, therefore, with reference to the income tax returns filed under Exs.A11 to A28, the average income has been arrived at, and thereby the income of deceased came to be determined as ₹15,05,679/- per annum. One third of the same has been deducted towards personal expenses, considering the age of deceased as 51 years and applying the multiplier of 11, future prospects were added @ 15%, accordingly, determined the total loss of earnings to be ₹1,26,97,892/-. The Tribunal also awarded ₹1,00,000/- towards loss of consortium, ₹25,000/- towards funeral expenses, ₹50,000/- towards love and affection, and ₹25,000/- towards loss of estate, thus, awarded a total sum of ₹1,28,97,892/-, in turn, payable along with interest at the rate of 7.5%.

Since the Tribunal has answered the first issue holding that there was contributory negligence on the part of both drivers of offending vehicles, it proceeded to determine the percentage of contributory negligence for the purpose of fixing the liability. The Tribunal, on appreciation of evidence, has ultimately fixed the liability of 70 : 30 against the insurers of luggage auto and Alto car, respectively. Accordingly, respondents 1 and 2 were held jointly and severally liable to pay 70% and respondents 3 and 4 for the remaining 30% of the compensation. The compensation so awarded was directed to be apportioned among the claimants as specified in the award. Assailing the same, the present appeals are preferred.

Heard Mr.K.Ratangapani Reddy, learned counsel for claimants; Mr.Gudi Srinivasu, learned counsel for 2^nd respondent insurer of luggage auto; and Mrs.S.A.V.Ratnam, learned counsel for 4^th respondent – insurer of Alto car.

Learned counsel appearing for the claimants mainly contended that the Tribunal while determining the net income of the deceased from various business concerns, has merely considered net income and not gross income after deduction of income tax. In elaboration, while drawing attention of this Court to one of the income tax returns for the assessment year 2004-05, marked as Ex.A11, concerning M/s.Sri Lakshmi Tubewells Pvt. Ltd., a proprietary concern, it is submitted that the amount of depreciation on RTA and compressor, motorcars and motorcycles etc. reflecting ₹8,28,735/-, ₹1,25,037/- and ₹9,644/-, in total, ₹9,63,416/- was not considered as income, thereby, the Tribunal misdirected itself in determining appropriate income, qua, the said assessee. Had aforesaid amount on account of depreciation been added to the gross income, the average net taxable income for 3 assessment years, in respect to the said proprietary concern, would have been ₹11,02,928/- after deduction of income tax paid, thus, the Tribunal committed a serious error while computing the income of the deceased qua the said proprietary concern.

Opposing aforesaid submissions, learned counsels appearing for both the insurers vehemently contended that the Tribunal has rightly taken average income of deceased with reference to three preceding assessment years of occurrence of the accident. It is further contended that the depreciation costs on capital assets as reflected in the income tax returns cannot be added to annual income of the deceased, as the same does not amount to tangible income for the purposes of computing annual income of the deceased. To buttress the same, reliance has been placed on the judgment of Hon'ble Apex Court in Malarvizhi v. United India Insurance Co. Ltd.^{11.(2020) 4 SCC 228}.

Further, it is also contended that the Tribunal has awarded various amounts under conventional heads, which are not in consonance with the dicta laid down by Hon'ble Apex Court in National Insurance Co. Ltd. v. Pranay Sethi^{22.(2017) 16 SCC 680}, hence, are unsustainable.

That apart, learned counsel appearing for the insurer of the luggage auto, further contended that the Tribunal was not right in fixing the contributory negligence in the ratio of 70 : 30, inasmuch as the accident had occurred on account of collision of the two offending vehicles, both the drivers have equally contributed to the negligence, therefore, it ought to have equally made liable.

Whereas, learned counsel for the Insurer of Alto car tried to support the order of the Tribunal, to the extent of fixing the negligence on both the insurers in the ratio of 70 : 30.

We have considered the submissions advanced by all the learned counsels appearing for respective parties and perused the record.

The issue that falls for our consideration is as to whether the Tribunal was fully right and justified in computing the income of deceased based on the income tax returns for the previous three assessment years and in doing so, whether the component of depreciation claimed on assets was rightly not included as taxable income for the purpose of computing the annual income of the deceased? Further, whether the Tribunal was justified in fixing the contributory negligence in the ratio of 70 : 30 qua respondents 2 and 4 respectively?

The deceased was having following business entities (a) M/s.Sri Lakshmi Tube Wells Ltd.; (b) M/s. Sri Lakshmi Bore Wells; (c) M/s.Sri Lakshmi Enterprises; (d) M/s.Sri Lakshmi Venkateswara Polymers; and (e) M/s.Sindhu Towers.

The claimants have examined PW.3 and PW.4, who are Chartered Accountant and Income Tax Officer, respectively, in support of the income tax returns marked under Exs.A11 to A28. Ex.A11 to A13 are income tax returns for the assessment years 2004-05, 2005-06, and 2006-07, relating to M/s.Sri Lakshmi Tubewells. Exs.A14 to A16 are the income tax returns for the assessment years 2004-05, 2005-06, and 2006-07 relating to M/s.Sri Lakshmi Borewells. Then, Exs.A17 to A19 are the income tax returns for the assessment years 2004-05, 2005-06 and 2006-07 relating to M/s.Sri Lakshmi Enterprises. Then Exs.A20 to A22, are the income tax returns for the assessment years 2005-06. 2006-07 and 2007-08 relating to M/s.Sri Lakshmi Venkateswara Polymers, partnership firm, and Exs.A23 and A24 are income tax returns for the assessment years 2006-07 and 2007-08, relating to M/s.Sindhu Towers, partnership firm. Exs.A26 to A28 are auditor's statement, expenditure statement, and statement of income.

The accident occurred on 15.01.2008. The income tax returns more or less deal with the period, anterior to the occurrence of accident or falling within the financial year. The Tribunal computed total annual business income of deceased at ₹15,05,679/-, comprising the assessed three-year average earnings from M/s. Sri Lakshmi Tubewells (₹5,68,438/-), M/s. Sri Lakshmi Borewells (₹3,63,906/-), and a 50% share of the partnership income from M/s. Sri Lakshmi Venkateswara Polymers (₹1,30,950/-) and M/s. Sindhu Towers (₹4,42,385/-).

It is now fairly well settled by catena of judgments of Hon'ble Apex Court that documents such as income tax returns and audit reports are reliable evidence to determine the income of deceased. It is also settled that taking an average of income recorded in three prior financial years of occurrence of accident, to determine the compensation under the head of loss of income is more appropriate. This view is fortified by the judgment of Hon’ble Apex Court in Rashmirekha Tripathy v. Sriram General Insurance Co. Ltd.^{33.2026 SCC OnLine SC 1256}.

In the income and expenditure statement under the head depreciation on rig and compressor, motorcycles etc., certain amounts have been indicated, the same have thereafter been adjusted in the balance sheet as a deduction for the purpose of arriving at the net taxable income and, in turn, the tax payable thereon.

It is the contention of the learned counsel for the claimants that the amounts indicated under the head depreciation also constitute an income in the hands of assessee, therefore, the same is required to be added to the gross income.

We are afraid such course of action would militate against the basic concept of determining the income of the deceased for the purpose of computing annual income. Any deduction made under the head depreciation in the books of accounts/balance sheet/audited statements would only be factored as an expense or a non-cash deduction that would reduce the taxable profits or net income of the business. The depreciation can never be included to income of the assessee. In fact, similar issue as to whether depreciation on fixed assets be added to the income of deceased fell for consideration of Hon'ble Apex Court in the case of Malarvizhi¹.

In that context, it has been held that depreciation is a deduction allowed for the decline in real value of tangible or intangible assets over its useful life and its value varies over time and cannot amount to tangible income for the purposes of computing annual income in a claim before the M.A.C.T. Therefore, the contention of appellants/claimants for inclusion of the amounts under the head depreciation to the income of deceased is unsustainable and preposterous.

Coming to the aspect of contributory negligence and fixing of liability in the ratio of 70 : 30, the Tribunal on appreciation of evidence before it, in particular Ex.A1 FIR, Ex.A4 charge sheet and Ex.A5 accident information report, has come to conclusion that the driver of luggage auto was predominantly negligible in causing the accident and further even the driver of Alto car was also to some extent negligent, as the accident occurred on account of head-on collision, thus, concluded contributory negligence was attributable to both the drivers, in the ratio of 70 : 30. There is no case registered against the driver of Alto car and further, 2^nd respondent has not even examined the driver of luggage auto to prove its point that the accident had occurred on account of the fault attributable equally to both the drivers. We, therefore, do not see any infirmity in the reasoning and ratio of negligence qua the insurers as determined by the Tribunal.

In view of our above observations, we do not find any infirmity in the impugned Award, dated 13.05.2014, passed by the Tribunal, and accordingly, the same is hereby confirmed, and all these appeals stand dismissed. No order as to costs.

As a sequel, miscellaneous petitions pending, if any, shall stand closed.