Ball hits umpire

" In a crucial league encounter there was a shot played to the deep square leg region and the batsmen settled for one run. However, the return throw was wild and it hit the square leg umpire. The batsmen scampered for another run. This was allowed. I would like to know whether the umpiring decision of awarding the extra run is correct?"

On the evidence supplied, the umpiring decision was correct.  The ball does not become dead just because it strikes an umpire; it would become dead, however, if it lodged in the umpire's dress.  If the ball striking the umpire had caused him to be seriously injured his colleague would be empowered to call and signal Dead ball.

The umpire is to be considered as an obstacle on the field of play and, if the ball strikes any object it simply remains in play unless there is some regulation or there has been a prior agreement to regard it as a boundary. 

Read more about Law 20 (Dead ball) at the MCC website