Compensation awarded under MV Act must compute after Deduction of Income Tax: Andhra Pradesh High Court [Read Order]

The Andhra Pradesh High Court held that compensation awarded under Motor Vehicle Act, 1988 computed after deduction of income tax. The court enhanced the amount of compensation once allowed and directed the insurance company to pay the balance amount in one month. Eerla Ramadevi, the petitioner filed appeal under section 173 of the Motor Vehicles Act,1988 by the claimants seeking enhancement of the compensation awarded in the Order and Decree dated 15.09.2016 passed by the Principal, Motor Accident Claims Tribunal, Nellore. Get a Copy of GST Smart Guide, Click here The claimants are the wife and children of one Eerla Hari Babu (‘deceased’). They had filed MVOP claiming compensation on account of the death of the deceased for a sum of Rs.1,00,00,000/-. While the deceased was proceeding in a car along with his friend V.V.Ravi Kumar from Cheemakurthi to Chennai. The driver of the car in a rash and negligent manner dashed the toll way stop rod and dashed an ongoing lorry from its behind. As a result, the car turned turtle and both the deceased as well as his friend died on the spot. The deceased was aged 42 years at the time of accident and was earning Rs.86,000/- per month by transporting granite in his lorries. The Respondent No.1 owner of the offending vehicle remained ex parte. The Respondent No.2-insurance company filed their formatted counter denying every aspect of the claim. Get a Copy of GST Smart Guide, Click here After considering the oral and documentary evidence, the Tribunal had adopted a multiplier of 14 and assessed Rs.40,000/- as the income of the deceased and granted compensation of Rs.43,51,800/- with interest @ 9 % per annum. Hence, the present Appeal is filed seeking enhancement. The appeal is only vis-a-vis correctness of compensation, the evidence on record are the Income tax returns for the Financial Years 2004-05, 2005-06 and 2006-07 on behalf of the claimants. It was argued that the Tribunal did not take into consideration the Income Tax returns for the financial year 2007-2008 as they were filed on 22.01.2008 i.e after the accident and was not supported by any books of account. The chartered accountant in his deposition though had stated that the deceased owned three lorries, but admitted that Income Tax returns for the financial year 2007-08 are not supported by books of accounts. The Inspector from the Income Tax department, had deposed that Income Tax returns for the financial year 2007-08 were based on estimation under Section 44 AE of the Act. Get a Copy of GST Smart Guide, Click here An examination of certified copy of the detailed Income Tax return for the Financial Year 2006-2007 would indicate that TDS collected from the deceased was Rs.2,81,992/-. This deduction of TDS is supported by statutory Form 16A and related documents issued in the name of the deceased were enclosed. The reasoning of the Tribunal in ignoring this was merely because the Income Tax returns were filed on 22.1.2008 and not supported by books of accounts cannot be sustained as the deceased did business and had earned income in that year as apparent from the TDS deducted. Further, the Income tax return for Financial Year 2006-07 even though it was based on estimated income, was supported by TDS amounts deducted and the Income Tax department had accepted the Income Tax return. Therefore, it would not be open to the Insurance company to object to the Income from being taken into consideration. Get a Copy of GST Smart Guide, Click here A division bench of Justice Ravi Nath Tilhari and Justice Nyapathy Vijay directed to compute compensation considering the income . The court partly allowed the appeal. The Insurance company shall deposit the balance amount within a period of one month from today before the Tribunal and the claimants are entitled to withdraw the amounts in proportionate ratios. No order as to costs. Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates