The Bombay High Court has held that, for the purpose of determining compensation under Section 166 of the Motor Vehicles Act, 1988, the income of the deceased need not be computed by averaging the ITRs of the preceding three years, and where only one ITR is available, or where multiple ITRs are available, reliance can validly be placed on the ITR which is closest to the date of death or reflects the highest income of the deceased, particularly in view of the benevolent and compensatory nature of the MV Act.
The Court also held that the concept of average income based on three years’ ITRs does not find place in any provision of the MV Act and cannot be read into the statute so as to deny higher compensation. It further held that interest on future prospects/future income is legally permissible.
A Single Judge Bench of Justice Aarti Sathe observed that the impugned judgment and award was well reasoned and that the MACT had correctly relied upon the ITR for AY 2018-19, being the only piece of evidence reasonably close to the date of death, to determine the deceased’s income at Rs. 4.52 lakhs. The Bench rejected the appellant’s contention that, in the case of business income, the average of the preceding three years’ ITRs must necessarily be taken.
The Bench also observed that the concept of income on the date of death does not mean exactly on the date of death, but a piece of evidence reasonably close to the date of death; and once the law is settled that even where multiple ITRs are filed, the ITR reflecting the highest income is to be considered, the concept of taking average income on the basis of multiple ITRs does not hold good.
The Bench further observed that the MACT had rightly deducted 1/4th towards personal expenses, applied 40% addition for future prospects in terms of National Insurance Co. Ltd. v. Pranay Sethi [(2017) 16 SCC 680], applied multiplier 16 in terms of Sarla Verma v. DTC [(2009) 6 SCC 121], and granted consortium in line with United India Insurance Co. Ltd. v. Satinder Kaur [(2021) 11 SCC 780]. The contention against grant of interest on future prospects was also rejected in view of the Supreme Court’s decision in Oriental Insurance v. Niru @ Niharika [2025 INSC 822], which held that interest on future income/prospects is grantable.
Briefly, the appeal was filed by National Insurance Co. Ltd. challenging the Judgment and Award passed by the MACT, Nashik, whereby respondent nos. 1 to 4, being the wife, daughter and parents of the deceased Hujefa Ejaj Anjum Usmani, were awarded compensation of Rs. 77.27 lakhs with interest at 6% p.a. from the date of filing till realization, inclusive of no-fault liability.
The deceased, aged 31 years, died in a motor vehicular accident on 21 July 2021 when the offending truck, owned by respondent no. 5 and insured with the appellant, was alleged to have been driven rashly and negligently and dashed into the deceased’s car. The claim petition had been filed under Section 166 of the Motor Vehicles Act, 1988, and the principal challenge in appeal was to the quantum of compensation, specifically the MACT’s reliance on the income tax return for AY 2018-19 to determine the deceased’s income and the grant of interest on future prospects/future income.
