Average of Three Years’ Post-Tax Income Valid for Assessing Loss of Dependency

On November 14, 2018, the deceased, Mr. Mamdubha Parmar, was riding his motorcycle when he was struck from behind by a car (bearing registration No. GJ-01-KD-7142) driven in a rash and negligent manner by Respondent No. 6.

The deceased succumbed to his injuries.

The original claimants (Respondents 1-5) filed a claim petition under the Motor Vehicles Act, asserting the deceased was a labour contractor earning Rs.3,62,536/- per annum.

The Motor Accident Claims Tribunal (MACT), Ahmedabad, partly allowed the petition, awarding Rs.42,56,750/- at 9% interest.

The Insurance Company appealed this award primarily on the grounds of quantum, alleging the Tribunal failed to deduct income tax from the gross income before calculating the future loss of dependency.

1. Whether the learned Tribunal erred in the assessment of the deceased's annual income by failing to deduct income tax, thereby resulting in an excessive award for future loss of dependency.

The Court applied the principles of assessment of compensation under the Motor Vehicles Act, 1988, specifically focusing on the determination of "actual income" for calculating the loss of dependency.

The core legal rule dictates that for the purpose of calculating compensation, the income of the deceased must be the net income after the deduction of income tax.

This relies on established precedents (such as Sarla Verma v. Delhi Transport Corporation) which mandate the use of Income Tax Returns (ITR) as reliable evidence of earnings, provided statutory deductions are accounted for.

The Court scrutinized the Tribunal’s handling of the evidence, specifically the Income Tax Returns for the years 2015-2016, 2016-2017, and 2017-2018 (Exhibits 42, 43, and 44).

Contrary to the appellant's contention that gross income was used, the High Court found that the records transpired that the Tribunal had indeed considered the income after deducting income tax.

The Tribunal calculated the average income of the last three years to arrive at a figure of Rs. 2,65,190/- per annum.

The Court determined that this methodology was sound and that the appellant’s claim of non-deduction of tax was factually incorrect based on the lower court's records.

The appeal was dismissed as being devoid of merit.

The Court directed the Tribunal to disburse the entire awarded amount to the claimants after due verification and deduction of any deficit court fees.

All connected civil applications were disposed of accordingly.