Compensation income must be assessed by averaging the deceased’s income from three preceding income-tax returns.

Kanak Kumar Bararia died on 30 July 2021 after being struck by a Bajaj Pulsar motorcycle allegedly driven rashly and negligently by the first respondent on Kodaikanal Lake Road.

His wife, daughters and parents filed a claim petition under the Motor Vehicles Act, 1988, asserting that the deceased was a partner in two businesses, an income-tax assessee, and earned approximately ₹1,50,000 per month.

The Motor Accidents Claims Tribunal held the motorcycle driver negligent on the basis of the FIR, final report and the evidence of the deceased’s wife.

The Insurance Company challenged the quantum and liability, including the alleged absence of a valid driving licence, in CMA No. 2002 of 2024. The claimants filed CMA No. 1219 of 2025 seeking enhancement, particularly on the basis of a higher income and 30% future prospects.

Whether the deceased’s income for calculating loss of dependency should be determined on the basis of the average gross income disclosed in the income-tax returns for the preceding three assessment years, rather than on the basis of a single return or asserted monthly income?

Whether the deductions reflected in the income-tax returns and the components of income relied upon by the claimants were required to be included or excluded in determining the deceased’s established income?

Whether the claimants were entitled to 30% future prospects, or whether the applicable addition was 25% having regard to the deceased’s age of approximately 45 years?

Whether the Tribunal’s award required interference in the Insurance Company’s appeal or enhancement in the claimants’ appeal?

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

For computation of loss of dependency, it relied on Sarla Verma v. Delhi Transport Corporation, concerning the appropriate multiplier and deduction for personal expenses, and National Insurance Co. Ltd. v. Pranay Sethi, which prescribes future-prospect additions of 40%, 25% and 10% for self-employed or fixed-salary persons below 40, between 40 and 50, and between 50 and 60 years, respectively, with income assessed after excluding the tax component.

Relying on Rashmirekha Tripathy v. Branch Manager, Sriram General Insurance Co. Ltd., the Court held that the date and supporting financial material accompanying income-tax returns are relevant, and that sufficiently supported returns may be considered, with the average of the preceding three years being a reliable basis.

Under Meenakshi v. Oriental Insurance Co. Ltd., salary-related components beneficial to the family may be included before applying future prospects.

National Insurance Co. Ltd. v. Indira Srivastava and Shyamwati Sharma v. Karam Singh were applied for the principles that beneficial salary components should be considered, while statutory income tax must be deducted and deductions such as provident fund, insurance premiums and loan repayments should not ordinarily be excluded from income.

The Court found that the Tribunal had not correctly determined the deceased’s established income by relying on the relevant income-tax material.

It examined the returns for Assessment Years 2019–20, 2020–21 and 2021–22 and determined the corresponding gross incomes, after the permissible treatment of deductions and interest income, as ₹3,76,383, ₹6,60,747 and ₹5,11,787.

Their average was ₹5,16,305 per annum, resulting in a monthly income of ₹43,025.

Since the deceased was about 45 years old, Pranay Sethi required an addition of 25% towards future prospects, not 30%.

After adding ₹10,756 towards future prospects, deducting one-fourth for personal expenses, and applying the multiplier of 14, the Court calculated loss of dependency at ₹67,76,448.

It found no sufficient basis to disturb the Tribunal’s awards under the remaining heads.

Thus, the Court rejected both the claimants’ request for a higher income and 30% future prospects and the Insurance Company’s challenge to the award, while recalculating the total compensation on the basis of the three-year average income.

The compensation was modified and fixed at ₹71,31,500, comprising ₹67,76,448 for loss of dependency and the amounts awarded under consortium, love and affection, funeral expenses, transportation and loss of estate.

The Insurance Company’s appeal in CMA No. 2002 of 2024 was dismissed.

The manner, mode and ratio of disbursement were left as directed by the Tribunal. There was no order as to costs, and the connected miscellaneous petitions were closed.