Income tax deduction on motor accident claims must strictly adhere to prevailing tax slabs, not flat rates.

The appellants (claimants) filed a claim under Section 173(1) of the Motor Vehicles Act, 1988, challenging the award dated 04.01.2024 passed by the VII Motor Accident Claims Tribunal (MACT), Gwalior in Case No. 467/2021

The deceased, Pinki, was a 28-year-old Assistant Teacher earning ₹45,332 monthly who died in a motor accident

The Tribunal awarded total compensation of ₹63,26,400

The appellants sought enhancement, arguing the Tribunal erred by executing a 10% income tax deduction without considering the applicable tax slabs and by awarding inadequate amounts under conventional heads

1. Whether the Claims Tribunal erred in its assessment of the deceased's net income by applying an incorrect income tax deduction rate

2. Whether the compensation awarded under the heads of future prospects, multiplier, and consortium requires enhancement to meet the standard of "just compensation"

The court applied the statutory framework of the Motor Vehicles Act, 1988, regarding just compensation.

It relied on the landmark precedent of Sarla Verma v. Delhi Transport Corporation (2009) 6 SCC 121 to determine the appropriate multiplier of 17 for the age group of the deceased

It further applied National Insurance Co. Ltd. v. Pranay Sethi (2017) ACJ 2700 to calculate future prospects at 50%

Regarding consortium, the court followed United India Insurance Co. Ltd. v. Satinder Kaur (2020) ACJ 2131

For income tax, the court applied the principle that only the portion of income exceeding the exempted taxable limit should be taxed according to prevailing slabs

The High Court found the Tribunal’s 10% flat tax deduction excessive. Specifically, it noted the deceased's annual income was ₹5,43,984; after subtracting the ₹2,50,000 exemption limit, only ₹2,93,984 was taxable

The Court reduced the tax rate to 5% on the taxable portion, adjusting the annual net income to ₹5,29,285

Applying the dependency deduction of 1/2, a 50% addition for future prospects, and a multiplier of 17 (per Sarla Verma), the Court recalculated the loss of dependency at ₹67,48,371

Additionally, the Court standardized the conventional heads, awarding ₹96,000 for consortium and ₹36,000 for loss of estate and funeral expenses

It held that the appellants are entitled to total compensation of ₹68,80,371, representing an enhancement of ₹5,53,971 over the original award

The court ordered the Insurance Company to pay the enhanced amount within three months with interest as fixed by the Tribunal

The delay of 24 days in filing the appeal was also condoned