The Supreme Court ITR motor accident compensation ruling clarifies that courts cannot adopt a rigid formula while determining the income of deceased persons or claimants based on Income Tax Returns (ITRs). Instead, courts must examine the facts of each case and apply separate principles to salaried and self-employed individuals. The Bench partly allowed the appeal and enhanced the compensation payable to the claimants.
A Bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh delivered the reportable judgment on July 1, 2026, in Rashmirekha Tripathy and Another v. The Branch Manager (Legal Claims), Sriram General Insurance Company Limited and Others, Civil Appeal arising out of SLP (C) No. 27220 of 2024.
Background of the Case
The appeal challenged the judgment dated April 25, 2024, passed by the Orissa High Court in MACA No. 452 of 2023. The High Court had modified the award dated February 24, 2023, passed by the Motor Accident Claims Tribunal (MACT), Berhampur, in MAC Case No. 92 of 2019.
The deceased, Manoranjan Pandey, aged 39, died in a road accident on May 29, 2018. A truck allegedly driven rashly and negligently struck the vehicle he was driving near Kaliabali Chakka on the National Highway.
Following the accident, police registered an FIR at Chamakhandi Police Station under Sections 279, 337, 338, and 304-A of the Indian Penal Code, 1860.
His legal representatives filed a claim under Section 166 of the Motor Vehicles Act, 1988. They sought compensation of ₹2.25 crore, claiming that the deceased operated a construction business and earned ₹15 lakh annually.
The MACT accepted the income reflected in the ITR for Assessment Year 2018-19. It assessed the annual income at ₹15 lakh, deducted one-third towards personal expenses, applied a multiplier of 16, and awarded ₹2,27,00,064 with 6% interest from the date of filing of the claim petition.
However, the insurance company challenged the award. The Orissa High Court averaged the income shown in the previous two ITRs, applied a multiplier of 15, and reduced the compensation to ₹1,87,75,150. Consequently, the claimants approached the Supreme Court.
Issue Before the Supreme Court
The principal issue before the Court was whether courts should rely only on the ITR for the immediately preceding year or calculate the average income reflected in the previous two or three years’ ITRs while assessing compensation under the Motor Vehicles Act.
Recognising the importance of the issue, the Court appointed Senior Advocate J.R. Midha and Advocate Salil Paul as Amici Curiae through an order dated February 7, 2025.
Submissions by the Amici Curiae
Senior Advocate J.R. Midha argued that courts follow no uniform approach while assessing income through ITRs. According to him, ITRs provide prima facie evidence of income but may not always reflect the deceased’s actual earning capacity.
He submitted that courts should also consider the nature of the business, its growth pattern, and financial records. Moreover, they should closely examine ITRs filed after the death of the claimant.
Amicus Curiae Salil Paul relied on ICICI Lombard General Insurance Co. Ltd. v. Ajay Kumar Mohanty ((2018) 3 SCC 686), where the Supreme Court considered the average income reflected in the previous three years’ ITRs.
Supreme Court Lays Down Guiding Principles
The Bench reiterated that the Motor Vehicles Act aims to award “just and fair compensation.” It relied on V. Pathmavathi and Others v. Bharthi Axa General Insurance Co. Ltd. and Another (2026 SCC OnLine SC 158), Reshma Kumari v. Madan Mohan ((2013) 9 SCC 65), and Anant v. Pratap ((2018) 9 SCC 450).
The Court held that ITRs remain an important statutory reference while assessing income. However, courts should avoid applying an inflexible formula.
For Salaried Individuals
The Court held that courts should ordinarily rely on the ITR for the immediately preceding year because promotions and salary revisions may significantly increase income.
Further, if the latest ITR does not reflect a promotion, courts may consider the promotion letter and other corroborative financial records.
For Self-Employed Individuals
For self-employed persons or business owners, courts should ordinarily consider the average income reflected in up to the previous three years’ ITRs.
Additionally, courts should evaluate:
- the nature, location, and category of the business;
- the business growth pattern;
- the effect of the death on the business;
- future business prospects;
- whether initial losses are typical for that business; and
- any other relevant business-related circumstance.
The Bench also observed that courts should carefully scrutinise ITRs filed after the death or injury of the claimant. Nevertheless, if financial statements adequately support such returns, courts need not reject them solely because they were filed after the accident.
Application to the Present Case
Applying these principles, the Court noted that the deceased declared an annual income of ₹11,59,882 for AY 2017-18 and ₹15,06,571 for AY 2018-19.
The High Court simply averaged these two returns and fixed the income at ₹13,33,226. However, the Supreme Court held that the High Court failed to examine the nature and growth of the deceased’s construction business. Therefore, it fixed the annual income at ₹14 lakh to ensure just and fair compensation.
Compensation Recalculated
The Court recalculated the compensation by:
- adding 40% towards future prospects;
- deducting one-third towards personal expenses;
- applying a multiplier of 15; and
- awarding compensation under the conventional heads in accordance with National Insurance Co. Ltd. v. Pranay Sethi ((2017) 16 SCC 680), United India Insurance Co. Ltd. v. Satinder Kaur ((2021) 11 SCC 780), and Rajwati alias Rajjo v. United India Insurance Company Ltd. (2022 SCC OnLine SC 1699).
Accordingly, the Court determined the total compensation at ₹1,97,81,505. This amount exceeded the ₹1,87,75,150 awarded by the High Court but remained below the ₹2,27,00,064 awarded by the MACT.
Final Directions
Finally, the Supreme Court partly allowed the appeal and modified the Orissa High Court’s judgment. The Supreme Court ITR motor accident compensation decision held that the claimant-appellants are entitled to ₹1,97,81,505 as compensation.
The Court directed the respondents to pay interest on the enhanced amount at the rate awarded by the Tribunal. It also instructed them to remit the amount directly into the claimants’ bank accounts within four weeks after receiving the bank account particulars from the appellants’ counsel.
The Bench also disposed of all pending applications, if any.
