WHETHER INCOME TAX RETURNS
WOULD TAKE PRECEDENCE OVER OTHER DOCUMENTS WHILE CALCULATING ANNUAL INCOME OF A
PERSON IN MOTOR ACCIDENT CLAIMS.
IT returns being statutory documents
can be relied upon to determine annual income. This aspect has been clearly explained
in 2020(1) TNMAC 216 (SC) in Malarvizhi
and otherd VS United india insurance company and another.
The brief of the case is as follows:
The appellants are the heirs and
legal representatives of Aranganathan, who died as a result of a motor accident
on 25th may 2001.He was travelling in an ambassador car bearing
regn.no. TN 23 A 7549 which was being
driven by another person, at about 12.45
am, a TATA Sierra car bearing regn.no. TN 20 Z 1613 came from the opposite
direction and dashed against the car of the deceased. Aranganathan was
seriously injured and died during the course of the accident. He is survived by
his wife and four daughters, who are the appellants before the court.
The appellants filed a claim petition
under section 166 of the motor vehicles act before the tribunal seeking
compensation of Rs.99,90,000/ The tribunal has awarded a sum of Rs. 59,04,000
together with interest at the rate of 7.5% per annum . The appellants filed
first appeal before the high court of madras. The high court estimated the
income of the deceased at a reduced figure of Rs.2,50,000 per annum from
Rs.4,48,790.55. The total compensation awarded was thus reduced from
Rs.59,04,000 to Rs.33,55,000. Aggrieved by the judgment of the high court, this
appeal has been preferred.
The deceased was aged 49 years old at
the time of accident. The appellants have stated that the deceased was a
business man, who derived income from many sources including business and
agricultural land measuring 36.76 acres. It was stated that the deceased was, a
whole sale dealer of cement and also owned wine shops. The land was sold in
recovery proceedings after death of the deceased.
The tribunal assessed the
agricultural income of the deceased at Rs.3,40,708 per annum and the total
income from business at Rs.89,590. The tribunal added to this Rs.30,000/ per
annum for income through real estate and contract business. The annual income
of the deceased was assessed at Rs.4,60,298. 30% was added to this towards
future prospects bringing the annual income to Rs.Rs.5,98,387.40. After a
deduction of ¼ of the total income towards living expenses, the
tribunal used a multiplier of 13 to arrive at an compensation of Rs.58,34,277.
Damages under conventional heads, including funeral expenses, loss of
consortium and loss of love and affection were computed at Rs.70,000/. A total
compensation of Rs.59,04,000/ was awarded.
In the appeal, the high court
concluded that on an analysis of the income tax returns filed by the deceased
for the financial years 1995 – 1996 to 2000-2001, the income declared for the
financial year 1997-1998 was the highest and must be taken as the annual income
of the deceased. Hence, Rs.2,09,211 was determined to be the annual income of
the deceased. Rs.40,000/per annum was added towards future prospects. The total
income was thus arrived at Rs.2,50,000 per annum. No deduction was made towards
personal expenses. Applying multiplier of 13, the loss of dependency was
calculated to be Rs.32,50,000/. To this, funeral expenses, loss of consortium
and loss of love and affection were added in the amount of Rs.1,05,000. A total
compensation Of Rs. 33,55,000/ was awarded.
Assailing the reduction of the
compensation, the counsel appearing for the appellant had contended
1. The high court has held
that the income - tax returns take precedence over other documents in the
determination of annual income. Over 52 documents were marked before the
tribunal demonstrating income from various sources, all of which were not disclosed
in the income –tax returns.
2. The high court erred in
not considering other contractual work awarded to the deceased and other
solvency certificates of the deceased in the computation of his annual income.
3. Even assuming that the
high court is justified in taking the income reflected in the tax return for
the financial year 1997-1998 as the determinant, the high court has erred in
not accounting for the depreciation costs on fixed assets which have been
reflected therein, and
4. The high court ought to
have calculated the monthly income of the deceased at Rs.50,000 taking into
account the turnover from his trade and wine business.
On the other hand, learned
counsel for respondents contended;
1. The high court is
justified in according precedence to the income-tax returns of the deceased to
determine his annual income;
2. There is no merit in the
contention that the appellant has suffered a loss on account of the sale of
properties for the settling of the debt owed to banks;
3. Depreciation on fixed
assets cannot be added to the income of the deceased; and
4. The award of the high
court is legally sustainable and calls for interference by this court;
The tribunal proceeded to
determine the agricultural income arising from 36.76 acres of land on the basis
of two judgments of the high court. The tribunal arrived at two different
figures by applying the decisions and proceeded to determine the agricultural
income on an average of the two amounts. The tribunal superimposed a possible
value of income from agricultural land despite a clear indication in the income
tax returns of the income from agricultural land. The method adopted by the
tribunal is not sustainable in law. On the other hand the high court has proceeded
on the basis of the income reflected in the income-tax returns for the
assessment year 1997-1998. The relevant portion of the return reads;
Income from house
property - Rs.1,920
Business profit -
Rs.1,21,071
Net agricultural
income - Rs. 88,140
The tax return indicates
an annual income of Rs.2,11,131 in the relevant assessment year. It was
contended by the appellant that other documents were marked which reflected the
income of the deceased. The determination must proceed on the basis of the
income tax return, where available is agreeable. The income tax return is a
statutory document on which reliance may be placed to determine the annual
income of the deceased. To the benefit of the appellant, the high court has
proceeded on the basis of the income – tax return for the assessment year for
the assessment year 1997 – 1988 and not 1999-2000 & 2000-2001 which
reflected a reduction in the annual income of the deceased
Learned counsel appearing
on behalf of the appellants drew the attention of this court in New india
assurance company VS Yogesh devi,2012 (1) TNMAC 371 (SC): 2010 (3) SCC 613, to
contend that this court may reasonably determine the income that accrues to the
deceased and also compute the expenses incurred in the upkeep of agricultural
land. In that case, a two judge bench of supreme court dealt with a claim where
“there is no evidence regarding the amount of income derived from the above
mentioned properties”. The only evidence available in regard to the monthly
income of the deceased was the statement of the claimant. In the present case,
the high court has relied on the income-tax return of the deceased. Further the
court in New india assurance opined that through a court may be required to
account for the depletion in the net income accruing from the assets of
deceased on account of payments for engaging managers, evidence must be adduced
to compute the depletion. The court held:
“In the normal course the
claimants are expected to adduce evidence as to what would e the quantum of
depletion of income from the above mentioned assets on account of the above
mentioned factors”
In the present case no evidence
was adduced to compute depletion.
Thus the net annual income of the deceased
is Rs.3,16,118. As per pranay sethi 25% of the annual income is added towards
future prospects. 25% of 3,16,118 = 79,029.5. Annual income is 3,16,118 + 79029
= Rs.3,95,147.5. 1/5 of the income has been deducted towards personal expense.Rs.3,16,118/
is arrived. Relevant multiplier is 13. Loss of dependency is 13 x 3,16,118 = Rs.41,09,534.
Loss of dependency --- Rs.41,09,534/
Funeral expenses --- Rs. 15,000/
Loss of estate --- Rs.
15,000/
Loss of consortium --- Rs. 15,000/
Loss of love and affection --- Rs. 50,000/
--------------------
Total
--- Rs.42,29,534/
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