Issue on Income calculation made u/s 44-AE of the Income Tax Act for Awarding compensation : Orissa HC Directs Re calculation

The High Court of Orissa directed a recalculation of the income under Section 44-AE of the Income Tax Act, 1961, for awarding compensation. The court found that the Tribunal had erred in calculating the compensation amount for the death of the deceased in a motor vehicular accident. The appellant, Pratibha Kumari Baral & Others, filed an appeal seeking modification of the compensation award, arguing that the Tribunal had miscalculated the compensation. The Tribunal had assessed the annual income of the deceased at Rs.1,53,861/- based on four years of Income Tax Returns, instead of the average income of the previous three years, as required by Section 44-AE. The appellant also contended that the Tribunal failed to award a periodic increment of 10% on general damages payable every three years.\r

Justice R K Pattanaik observed that the net total taxable income for small businesses engaged in plying, hiring, or leasing goods carriages should be calculated at the rate of Rs.7,500/- a month or part thereof during the previous year, as per Section 44-AE of the Income Tax Act. The court directed the recalculation of the compensation, reassessing the annual income of the deceased at Rs.1,76,496/-, taking into account the average income of the previous three years. Additionally, the court added an amount of Rs.22,500/- to the income, considering the purchase of vehicles shortly before the accident. The modified award required the Insurance Company to deposit a sum of Rs.30,88,592/- along with interest at the rate of 7% per annum within eight weeks.