Supreme Court highlights importance of accurate income evidence in compensation, stating 'income tax returns are reliable evidence to assess the income of a deceased', Read Judgment

In a recent case involving compensation for the death of the appellants’ parents, the Supreme Court noted the importance of ensuring that compensation is "fair, reasonable and equitable," particularly when assessing not just the income of the deceased but the broader financial impacts of their loss.

Additionally, the Court noted that "Income Tax Returns are reliable evidence to assess the income of a deceased," emphasizing the importance of accurate documentation in determining a just compensation amount. However, the Court found the High Court's decision to reduce the compensation to be inconsistent with established legal principles, ultimately restoring the Tribunal's original award.

The appellants’ parents were traveling in a Tempo Traveler from Salem to Madurai when a bus coming from the opposite direction collided with their vehicle near Namakkal, leading to their deaths. The bus involved (Registration No. TN30 N0612) was uninsured.

The appellants filed two separate compensation claims (M.C.O.P No.1573/2009 for the father and M.C.O.P No.1574/2009 for the mother) seeking Rs.1 crore each. They supported their claims with documents like the Partnership Deed of their parents' firm and income tax returns. The Tribunal awarded compensation of Rs.58,24,000 for the father and Rs.93,61,000 for the mother, with interest at 7.5% per annum.

Respondent 1 (R1) appealed the Tribunal's award, and the High Court partly allowed the appeal, reducing the compensation to Rs.26,68,600 for the father and Rs.19,22,680 for the mother. The High Court revised various factors, including the income and multiplier used for calculation.

The appellants argued that the High Court erred in reducing the compensation, stating that the business losses due to the parents' deaths were not properly considered. They contended that the High Court wrongly assumed that the appellants continued the business without suffering any loss, even though they were not actively involved before the deaths. The appellants cited previous rulings to argue that the loss of income should account for both the deceased's efforts and capital contributions, not just the remuneration. They also claimed that the multiplier applied by the High Court was too low, and the compensation awarded was drastically reduced beyond what R1 had challenged. The appellants emphasized that the Tribunal’s award was more accurate and supported by evidence, including the business’s reduced profits and workforce post-death.

Contentions of the Respondent:

R1 argued that the appellants’ claims were excessive, and the Tribunal’s award was higher than what was reasonable. R1 supported the High Court’s decision to reduce the compensation after considering the evidence presented, particularly testimonies of witnesses PW-8, PW-9, and PW-10. R1 contended that the cases cited by the appellants were not applicable to this situation. R1 concluded that the High Court’s judgment was appropriate and did not require interference.

The Court found that the Tribunal's Award was well-considered, stating: "The Award rendered by the Tribunal is well-considered." It emphasized that the appellants stepping into the shoes of the deceased did not guarantee the ability to run the Mill, especially due to their lack of experience: "merely because the appellants stepped into the shoes of the deceased, by such factum itself, the appellants would not be capable of running the Mill." The Court also affirmed the Tribunal's notional income assessment, noting that "the notional income fixed by the Tribunal of Rs.60,000/- per month, is much more reasonable."

The Court referred to previous cases for support, stating: "Income Tax Returns are reliable evidence to assess the income of a deceased," and referenced the case of K Ramya v. National Insurance Co. Ltd., 2022, to highlight that compensation should be "fair, reasonable and equitable." It also noted that "compensation must be a more comprehensive form of pecuniary relief which involves a broad-based approach."

The Court expressed satisfaction with the Tribunal’s approach, stating: "the view of the Tribunal rendered in the form of the Award satisfies our judicial conscience," and criticized the High Court’s reasoning for being inconsistent with settled law.

The Court, for the reasons stated, found that the impugned judgment of the High Court deserved to be interfered with and, therefore, set it aside. The award passed by the Tribunal was restored, and R1 was directed to make payments to the appellants as per the Tribunal's award, after adjusting any amounts already paid, within six weeks from the date of the judgment. The appeals were disposed of accordingly, with no order as to costs.

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