Allowances must be included in income assessment for motor accident compensation regardless of taxability.

The deceased, Sarat Bora, died in a motor vehicle accident on 10.10.2017 when he was knocked down by a motorcycle bearing registration No. AS-21-F-4610.

The claimant (widow) filed for compensation under Section 166 of the Motor Vehicles Act, 1988.

The Tribunal awarded Rs. 27,81,000/- with 6% interest, calculating monthly income at Rs. 20,000/- while excluding a Rs. 5,000/- allowance.

The Insurance Company appealed, seeking a reduction on grounds of excessive income estimation and arguing for a 50% deduction for personal expenses as the deceased's daughter died during the proceedings.

The claimant cross-appealed for enhancement, arguing the allowance should be included in income and the interest rate was too low.

1. Whether the allowances received by the deceased (Rs. 5,000/- for miscellaneous expenses) should be included in the computation of monthly income for assessing compensation.

2. Whether the deduction for personal and living expenses should be increased from one-third to one-half due to the death of a dependent daughter during the pendency of the inquiry.

3. Whether the addition for "future prospects" and the rate of interest awarded were legally sustainable.

The Court relied on Manorama Sinha v. Divisional Manager, Oriental Insurance Co. Ltd. (2025 SCC Online 2241), which mandates including allowances in monthly income even if non-taxable.

Regarding future prospects, it applied National Insurance Co. Ltd. v. Pranay Sethi (2017 16 SCC 680), establishing a 25% addition for those on fixed salaries aged 40-50.

For personal expense deductions, it applied Kirti v. Oriental Insurance Co. Ltd. (2021 2 SCC 166), which holds that legal liabilities crystallize at the time of the accident and subsequent deaths of dependents do not reduce the compensation entitlement.

The Court found the Tribunal erred by excluding the Rs. 5,000/- allowance, as precedents dictate that all components of salary must be considered.

Regarding future prospects, since the deceased was not in a permanent government job but employed by an NGO, the Court corrected the Tribunal's 30% addition to 25% per the Pranay Sethi guidelines.

On the issue of dependency, the Court rejected the insurer’s plea for a 50% deduction, noting that at the time of the accident/filing, the daughter was a dependent; her subsequent death does not retroactively alter the "one-third" deduction rule applicable to 2-3 dependents.

Finally, the Court found the 6% interest rate inadequate and increased it to 7.5% per annum to reflect inflation and market trends.

The insurer was directed to disburse the balance within six weeks, with Rs. 7,00,000/- to be kept in a fixed deposit for the claimant for two years.