Income Tax Deductions from Gross Salary Are Mandatory for Determining Just Compensation in Fatal Accident Claims

The appellants (claimants) filed an appeal seeking enhancement of the compensation awarded by the IV Motor Accident Claims Tribunal (MACT), Bilaspur, in M.A.C.C. No. 38/2022.

On November 8, 2019, the deceased, Ankaal Singh Jagat, a Lab Technician earning a gross salary of ₹49,609, was killed in a motor accident involving a Baleno car (CG-10-BF-0748) driven by Respondent No. 2 and insured by Respondent No. 3.

The Tribunal awarded a total compensation of ₹57,66,360 with 7% interest per annum.

The appellants challenged the award on the grounds that the deduction of income tax from the salary was impermissible and the overall quantum was on the lower side.

1. Whether the deduction of income tax from the gross salary of the deceased for calculating "loss of dependency" was legally valid.

2. Whether the compensation awarded by the Tribunal warrants enhancement or can be categorized as "just compensation" under the MV Act.

The court applied the provisions of Section 166 and Section 173 of the Motor Vehicles Act, 1988, regarding the claim and appeal for accident compensation.

It followed the established principles for calculating compensation, including the addition of "future prospects" (15% for the deceased's age bracket) and the deduction of personal expenses (1/4th for the number of dependents) as per the guidelines laid down by the Supreme Court in Sarla Verma v. Delhi Transport Corporation and National Insurance Co. Ltd. v. Pranay Sethi.

The court also applied the legal principle that "just compensation" should neither be a meager amount nor a "bonanza".

The High Court examined the Tribunal's calculation and found that the monthly gross salary of ₹49,609 was correctly identified based on the salary certificate.

The Court upheld the Tribunal's decision to deduct income tax as per the relevant financial year (2020-2021) slabs before calculating dependency, noting that net income after tax is the standard basis for assessment.

The yearly income was determined at ₹5,63,747; after adding 15% for future prospects and applying a multiplier of 11, the loss of dependency was calculated at ₹53,48,552.

The Court further verified that the Tribunal correctly awarded conventional heads, including ₹16,500 each for loss of estate and funeral expenses, and a total of ₹1,68,000 across various forms of consortium (spousal, parental, and filial).

The Court concluded that the total award of ₹57,66,360 was fair and reasonable.

Accordingly, the appeal was dismissed, and the award passed by the IV Motor Accident Claims Tribunal, Bilaspur, was upheld.