Supreme Court of India • Motor Accident Claims • 2026 INSC 661
ITRs and Accident Compensation: The Supreme Court Lays Down How a Victim's Income Must Be Assessed
Previous year's ITR for the salaried, a three-year average for the self-employed — the Court finally settles the conflict in Rashmirekha Tripathy v. Sriram General Insurance.
By Akinchan Aggarwal, Advocate, Punjab & Haryana High Court | Published on Lawizard | Citation: 2026 INSC 661 | C.A. arising out of SLP(C) No. 27220 of 2024
How do you put a rupee figure on a life cut short on the highway? For the families of accident victims, that figure often turns on a single, deceptively simple question — which Income Tax Return do the courts look at to decide how much the deceased earned? The last one filed? An average of the last two? The last three? For years, tribunals and High Courts answered differently, and the compensation swung by lakhs depending on the approach.
On 1 July 2026, in Rashmirekha Tripathy & Anr. v. The Branch Manager (Legal Claims), Sriram General Insurance Co. Ltd. & Ors., 2026 INSC 661, a Bench of Justice Sanjay Karol and Justice Nongmeikapam Kotiswar Singh put the confusion to rest. The Court laid down a clean, workable framework for using Income Tax Returns (ITRs) to assess the annual income of a deceased or injured claimant under the Motor Vehicles Act, 1988 — and, tellingly, applied it the same day to two companion appeals to show exactly how it works.
⚖️ Key Takeaways at a Glance
- There is no hard and fast formula — but ITRs, being a statutory document, are an important reference point for income.
- Salaried persons: the ITR of the previous year alone is sufficient (a promotion's impact shows up in that year).
- Self-employed / business: take the average of up to the previous three years' ITRs, read with surrounding circumstances of the business.
- The date of filing of an ITR matters — returns filed after the accident may show inflated income and need corroboration.
- The lodestar remains “just and fair compensation” under Section 168 — neither arbitrary nor niggardly.
Case Snapshot
| Case Title | Rashmirekha Tripathy & Anr. v. Branch Manager (Legal Claims), Sriram General Insurance Co. Ltd. & Ors. |
| Citation | 2026 INSC 661 (Reportable) |
| Court | Supreme Court of India (Civil Appellate Jurisdiction) |
| Bench | Justice Sanjay Karol & Justice Nongmeikapam Kotiswar Singh |
| Date of Judgment | 1 July 2026 |
| Statute | Sections 166 & 168, Motor Vehicles Act, 1988 |
| Amicus Curiae | Mr. J.R. Midha, Sr. Adv. & Mr. Salil Paul, Adv. |
| Result | Appeal allowed; compensation enhanced to ₹1,97,81,505 |
The Question Before the Court
Recognising the importance of the issue, the Court appointed two experts — senior advocate Mr. J.R. Midha and Mr. Salil Paul — as amici curiae. Mr. Midha pointed out the lack of uniformity: some courts averaged three years, others took only the last return. Crucially, he stressed that while an ITR is prima facie evidence of income, it does not always reflect the true income — the business income pattern, growth pattern and nature of the business also matter. Mr. Paul drew the Court's attention to ICICI Lombard v. Ajay Kumar Mohanty, where a three-year average had been used.
The Framework the Court Laid Down
Beginning from first principles, the Court reiterated that the object of a motor accident claim is “just and fair compensation” under Section 168 — a “rough approximation” that tries “to measure the immeasurable,” as it had put it in V. Pathmavathi v. Bharti Axa. Against that backdrop, it held that there can be no hard and fast formula, and then drew a clear line between two classes of victims:
👔 Salaried individuals — the previous year's ITR
For a salaried person, only the ITR of the previous year is sufficient to show the annual income from salary. The reason is practical: the financial impact of a promotion is significant and may be reflected only in that latest year's return. If the victim had not completed a year in the promoted post — or had not yet filed an ITR for it — the court will look to the promotion letter and other corroboratory financial statements.
🏗️ Self-employed / business — a three-year average
For a self-employed person or one running a business, the reference point is the average of the income in the ITRs of up to the previous three years. Where only one or two ITRs exist — and given how business income fluctuates — the court must also weigh the surrounding circumstances:
- the nature of the business (including its geographic location and category);
- its growth pattern and the impact of the death on the business;
- its potential growth (some ventures are capital-intensive at the outset and profitable only at scale);
- negative income in the initial years, which may not reflect true financial standing; and
- any other relevant factor relating to the business.
How the Case Arose
On 29 May 2018, near Kaliabali Chakka on the National Highway, a rashly driven truck struck the vehicle of Mr. Manoranjan Pandey, aged 39, who ran his own construction business and was the sole breadwinner of his family. He died during treatment. His legal representatives claimed compensation under Section 166 before the MACT, Behrampur.
The three forums valued his income — and therefore the compensation — very differently, which is precisely what brought the ITR question to a head:
| Forum | Income taken | Method | Compensation |
|---|---|---|---|
| MACT, Behrampur | ₹15,00,000 | Last ITR (AY 2018-19); multiplier 16 | ₹2,27,00,064 |
| High Court of Orissa | ₹13,33,226 | Average of two ITRs; multiplier 15 | ₹1,87,75,150 |
| Supreme Court | ₹14,00,000 | Three-year approach + nature of business; 40% future prospects; multiplier 15 | ₹1,97,81,505 |
The two ITRs on record showed income of ₹11,59,882 (AY 2017-18) and ₹15,06,571 (AY 2018-19). The High Court had simply averaged them to ₹13,33,226 without looking at the nature of the business. Correcting that, and noting that the deceased ran a construction business, the Supreme Court fixed the annual income at ₹14,00,000, added 40% for future prospects (age 39), applied the 1/3rd deduction and a multiplier of 15, and — with the conventional heads under Pranay Sethi — arrived at ₹1,97,81,505.
The Framework in Action — Two Companion Appeals
To leave no doubt about how the new framework operates, the same Bench decided two connected appeals on the very same day, expressly “keeping in view the principles laid down” in Rashmirekha Tripathy:
Rajani & Ors. v. Mukesh & Ors. — the “three, not four” rule
The deceased was a 49-year-old insurance agent. The High Court had averaged the last four ITRs. The Supreme Court held this to be an error — a performance-linked spike in one year is no reason to drag in an extra ITR. Averaging the correct three years (AY 2015-16, 2016-17, 2017-18) gave an income of ₹6,87,802, and compensation was enhanced to ₹87,09,282.
Smt. Rekha & Ors. v. Dinesh Porwal & Ors. — ITRs filed after death
The deceased, 28, ran a wholesale grocery store; some ITRs had been filed after his death. Unable to test whether those figures were inflated (no supporting financial statements) and unwilling to remand, the Court used the ITRs on record together with the nature of the profession to fix the annual income at ₹3,25,000, enhancing compensation to ₹60,79,550.
Read together, the trilogy shows the framework doing real work: capping an over-generous four-year average in one case, and cautiously handling post-death ITRs in another.
Why This Judgment Matters
For claimants, insurers, tribunals and advocates alike, Rashmirekha Tripathy brings much-needed predictability to the single most contested variable in a fatal-accident claim — the victim's income. Salaried families now know that the latest ITR (or a promotion letter) will carry the day, while business families get the fairer three-year average that smooths out a bad or a bumper year. By flagging the risk of post-death, inflated returns and directing attention to the real economics of a business, the Court has also armed insurers with principled grounds to resist padded claims — without letting them shrink genuine ones. In short, it is a rare judgment that is both pro-claimant and pro-fairness, and it will be cited in virtually every MACT matter going forward.
📄 Read / Download the Full Judgment
The complete judgment in Rashmirekha Tripathy & Anr. v. Sriram General Insurance Co. Ltd. & Ors., 2026 INSC 661 (along with the two companion judgments), is embedded below for reading and download.
Frequently Asked Questions (FAQ)
Q1. Which ITR is used to assess a salaried victim's income?
Only the ITR of the previous year, since a promotion's financial impact is reflected in that latest return. If no ITR exists for the promoted period, the promotion letter and corroboratory financial statements are used.
Q2. How is a self-employed or businessperson's income assessed?
By averaging the income in the ITRs of up to the previous three years, read together with the nature, growth pattern, potential and any negative income of the business.
Q3. Are ITRs conclusive proof of income?
No. ITRs are an important statutory reference point but only prima facie evidence; the date of filing matters, and returns filed after the accident may need corroboration.
Q4. What was the final compensation in Rashmirekha Tripathy?
The Supreme Court fixed the annual income at ₹14,00,000 and awarded a total of ₹1,97,81,505 — higher than the High Court's ₹1,87,75,150 but below the Tribunal's ₹2,27,00,064.
Cases Referred
- ICICI Lombard General Insurance Co. Ltd. v. Ajay Kumar Mohanty, (2018) 3 SCC 686
- V. Pathmavathi v. Bharti Axa General Insurance Co. Ltd., 2026 SCC OnLine SC 158
- Reshma Kumari v. Madan Mohan, (2013) 9 SCC 65
- Anant v. Pratap, (2018) 9 SCC 450
- National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680
- United India Insurance Co. Ltd. v. Satinder Kaur, (2021) 11 SCC 780
- Rajwati alias Rajjo v. United India Insurance Co. Ltd., 2022 SCC OnLine SC 1699
About the Author
Akinchan Aggarwal
Advocate, Punjab & Haryana High Court | B.A. Hons. (Social Sciences), LL.B, LL.M (Gold Medalist) | UGC NET | Co-founder, Lawizard.
Tags: ITR motor accident compensation, income assessment Motor Vehicles Act, Rashmirekha Tripathy v Sriram General Insurance, 2026 INSC 661, just and fair compensation, MACT income, salaried vs self-employed, three year average ITR, Pranay Sethi, Sanjay Karol, Lawizard.
