ITR Filed Prior to Death Proves Earning Capacity; 50% Personal Expenses Deduction Erroneous

Impact of ITR on Compensation Claims

The Calcutta High Court has granted an appeal allowing the claimant to establish earning capacity through an Income Tax Return (ITR) filed prior to death. The court criticized the earlier deduction of 50% for personal expenses as erroneous, ultimately directing Bajaj Allianz General Insurance Co. Ltd. to pay enhanced compensation with interest.

The judgment underscores the pivotal role of tax documentation in validating earning capacity. By relying on the ITR submitted before the deceased's passing, the court highlighted that income claims should reflect actual earnings rather than arbitrary deductions.

This ruling reiterates the importance for insurers to rely on concrete evidence of earning capacity rather than presumptive deductions, thereby influencing how claims are processed moving forward. Practitioners should be aware of this precedent when advising clients on compensation matters linked to insurance claims.