The Supreme Court of India, in a significant ruling on motor accident compensation, has set aside a Delhi High Court judgment, clarifying that Income Tax Returns (ITRs) are credible evidence for determining income, but do not automatically justify an award for future prospects if the claimant’s business is ongoing. The bench, comprising Justice J.K. Maheshwari and Justice Aravind Kumar, reduced the compensation awarded to an accident victim from over ₹30 lakhs to ₹9.06 lakhs, holding that the High Court had erred in its assessment of both functional disability and future prospects.
The appeal was filed by the Uttar Pradesh Road Transport Corporation (UPSRTC) challenging the High Court’s decision to enhance the compensation for injuries sustained by Vibhor Fialok in a road accident.
Background of the Case
The case originated from a claim petition filed by Vibhor Fialok seeking ₹50 lakhs for injuries from a road accident on August 4, 2014.
The handling of the claimant’s income proof became a central issue. Initially, the claimant contended before the Motor Accident Claims Tribunal (MACT) that he was self-employed. However, he later claimed to be an employee of M/s. R.K. Enterprises. The MACT disregarded the three ITRs filed by the claimant for the years 2012-13, 2013-14, and 2014-15, and instead relied on witness testimony to assess his income at ₹15,400 per month, awarding a total compensation of ₹4,24,000.
Dissatisfied, both parties appealed. The High Court of Delhi, in a departure from the Tribunal’s approach, accepted the ITRs as credible evidence of the claimant’s income. Relying on the ITRs and adding 40% for future prospects, the High Court enhanced the compensation to ₹30,91,482.
Arguments in the Supreme Court
The UPSRTC argued that the High Court had erred by:
- Wrongly equating the 48% disability of the right lower limb with a 48% functional disability of the whole body.
- Incorrectly awarding future prospects, as the claimant’s own business was still operational, meaning there was no future loss of income.
Supreme Court’s Analysis and Ruling
The Supreme Court reiterated that ITRs are credible evidence for computing a claimant’s salary. The judgment stated, “It is a settled position of law that, Income Tax Returns (ITR’s) of the claimant are credible source of evidence and therefore the average of the ITR’s filed by the claimant is to be considered for determining the monthly income of the claimant.”
On Income and Future Prospects: The Court affirmed the High Court’s decision to rely on the ITRs over the Tribunal’s assessment. It calculated the claimant’s average annual income based on the three ITRs as ₹2,27,660 (or ₹18,972 per month).
However, the Supreme Court overturned the High Court’s decision to award future prospects. It held that since the claimant’s business was still continuing, he would not lose that source of income due to his injuries. The judgment stated, “…it can be seen that the claimant was having his own source of income and he would not lose the same because of the injuries suffered by him and therefore we are of the opinion that the claimant is not entitled to future prospects and the High Court erred in granting the same.”
On Functional Disability: The Supreme Court also found that both lower courts had erred in their calculations of functional disability. The judgment noted, “There was no justification to arrive at a conclusion that claimant had suffered either 40% or 48% functional disability based on right lower limb disability being 48%.” Applying the standard formula (1/4th of the lower limb disability), the Court assessed the whole-body functional disability at 12%.
Final Compensation Awarded
Based on its findings, the Supreme Court recalculated the just compensation. The total award was reduced to ₹9,06,100, payable with 9% per annum interest. The breakdown is as follows:
- Loss of Future Earning Capacity: ₹4,64,434.56 (based on 12% functional disability and income from ITRs)
- Loss of Income during laid up period (5 months): ₹94,860
- Medical Expenses: ₹8,250
- Conveyance charges: ₹7,000
- Special Diet: ₹9,000
- Attendant charges: ₹22,500
- Pain and suffering: ₹1,00,000
- Loss of Disfigurement/Disability: ₹2,00,000
The Court allowed the appeal and directed the UPSRTC to pay the revised amount, granting it liberty to recover any excess amount already paid.
