Sole Income Tax Return closest to death is a valid basis for determining business income in motor accident claims.

The Respondents (legal heirs) filed a claim under Section 166 of the Motor Vehicles Act, 1988, following the death of Hujefa Ejaj Anjum Usmani, aged 31, in a motor vehicular accident on July 21, 2021

The Motor Accident Claims Tribunal (MACT), Nashik, awarded Rs. 77,27,864/- with 6% interest

The Appellant challenged the award on two primary grounds: first, that the MACT erroneously calculated the deceased’s business income based on a single Income Tax Return (ITR) for AY 2018-19 instead of an average of three years; and second, that interest should not be awarded on the "future prospects" component of the compensation

1. Whether the income of a deceased person engaged in business must be determined by averaging at least three years of ITRs, or if a single ITR closest to the date of death is sufficient

2. Whether interest is payable on the component of compensation awarded toward "future prospects"

The court applied the principle that the Motor Vehicles Act is benevolent legislation intended to provide "just compensation"

It relied on the Supreme Court’s decision in Malarvizhi v. United India Insurance Co. Ltd., which established that the ITR reflecting the highest income is preferred over lower-income declarations for the claimant's benefit

It followed National Insurance Co. Ltd. v. Pranay Sethi regarding a 40% addition for future prospects for victims under 40 and Sarla Verma v. DTC regarding the application of the multiplier

Finally, it applied Oriental Insurance v. Niru @ Niharika & Ors. (2025), which settled that interest is indeed payable on future income/prospects

The Court rejected the Insurance Company's contention that a three-year average is mandatory for business income. It reasoned that since compensatory law aims for the victim's benefit, the ITR closest to the date of death (AY 2018-19) served as a reasonable evidentiary basis for assessment

The Court noted that even if multiple ITRs were available, judicial precedent favors selecting the highest declared income rather than an average

Regarding interest on future prospects, the Court noted that while "future prospects" represent potential future earnings, the delay in litigation (often several years) justifies awarding interest from the date of the petition to compensate for the deprivation of funds during the trial

The Court held that (1) a single ITR closest to the date of death is a valid basis for determining income, and (2) interest @ 6% p.a. is legally payable on the entire compensation amount, including future prospects

The Respondents were granted liberty to withdraw the deposited amount with accrued interest