Applicable income tax must be deducted from the deceased’s enhanced income when computing motor accident compensation.

Late Kamini Sahu, aged 32 years, died in a road accident on 11 January 2019.

She was employed as a teacher and earned a monthly salary of ₹33,416, as established by her salary certificate.

Her husband, two minor children, father-in-law and mother-in-law filed a claim petition against the driver, owner and insurer of the offending vehicle.

The Claims Tribunal awarded ₹60,58,144 as compensation.

The insurer appealed under Section 173 of the Motor Vehicles Act, 1988, contending that the head-on collision warranted a finding of contributory negligence and that income tax should have been deducted from the deceased’s income.

The claimants sought enhancement on the grounds that the husband should also be treated as a dependent/legal representative and that future prospects should be assessed at 50% rather than 40%.

Whether the Claims Tribunal erred in failing to apply the principle of contributory negligence merely because the accident involved a head-on collision?

Whether income tax was required to be deducted from the deceased’s annual income, including the amount enhanced by future prospects, while computing loss of dependency?

Whether the deceased’s husband was required to be treated as a legal representative/dependent for computation of compensation, while the father-in-law and mother-in-law were excluded?

Whether the deceased, being a salaried employee aged 32 years, was entitled to a 50% addition towards future prospects and whether the conventional heads required enhancement?

The Court applied Section 173 of the Motor Vehicles Act, 1988, governing appeals against awards of the Claims Tribunal.

It held that contributory negligence must be established by evidence and cannot be presumed solely from a head-on collision.

For computation of loss of dependency, the Court relied on National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680, under which a salaried deceased below 40 years is entitled to a 50% addition for future prospects; Sarla Verma v. Delhi Transport Corporation, (2009) 6 SCC 121, concerning the appropriate deduction for personal expenses and multiplier; and Magma General Insurance Co. Ltd. v. Nanu Ram, (2018) 18 SCC 1308, concerning compensation under conventional heads, including consortium.

The Court also applied the principle that applicable income tax must be deducted from the income relevant for assessing compensation.

Under Jitendra Khimshankar Trivedi v. Kasam Daud Kumbhar, (2015) 4 SCC 237, the enhanced compensation was directed to be paid by the insurer.

The Court upheld the Tribunal’s rejection of contributory negligence because the insurer produced no evidence establishing negligence on the part of the deceased, and neither the driver nor the owner entered the witness box for that purpose; the filing of the charge-sheet against the offending vehicle’s driver supported the Tribunal’s finding.

It held that the deceased’s annual salary was ₹4,00,992 and, applying Pranay Sethi, added 50% future prospects, resulting in ₹6,01,488.

From this amount, the Court deducted ₹34,109.50 as income tax payable for financial year 2018–19, treating the resulting annual income as ₹5,67,378.

Since the deceased left three dependants, one-third was deducted towards personal expenses, and the multiplier of 16 applicable to her age of 32 years was applied, producing ₹60,52,032 towards loss of dependency.

The Court agreed that the father-in-law and mother-in-law were not dependants because they had agricultural land and an independent source of livelihood, but held that the husband was a legal representative and was required to be considered along with the two minor children.

It further enhanced the amount under conventional heads from ₹70,000 to ₹1,50,000.

The Court enhanced the total compensation from ₹60,58,144 to ₹62,02,032, thereby awarding an additional ₹1,43,888.

The enhanced amount was directed to carry interest at 6% per annum from the date of filing of the appeal until realization.

The husband was held entitled to compensation along with the minor children, while the remaining terms of the Tribunal’s award were retained.

The Registry was directed to communicate the enhanced award to the claimants in Hindi, with assistance from paralegal workers where necessary.