Income tax liability must be deducted from deceased’s augmented income when computing loss of dependency.

On 24 January 2022, Shanta Kumar Pradhan was travelling in a Maruti Suzuki vehicle bearing registration No. OD-15-S/3845 when its driver allegedly drove rashly and negligently near Village Teka on National Highway No. 53, causing an accident in which Shanta Kumar died.

His widow, minor daughter, and parents filed a claim petition under Section 166 of the Motor Vehicles Act, 1988, claiming ₹1,22,16,750 as compensation.

The deceased was a Government teacher, aged approximately 39 years, and was drawing a gross monthly salary of ₹45,795.

The Claims Tribunal awarded ₹92,73,488.

The insurer appealed under Section 173 of the Act, contending principally that income tax ought to have been deducted while calculating the deceased’s loss of dependency.

The claimants opposed the appeal and sought enhancement under the conventional heads.

1. Whether the deceased’s annual income, after adding future prospects, was required to be reduced by the applicable income-tax liability before computing loss of dependency?

2. Whether the compensation awarded under the conventional heads required modification in accordance with the applicable principles governing consortium, loss of estate, and funeral expenses?

The Court applied Sections 166 and 173 of the Motor Vehicles Act, 1988, concerning claims for compensation arising from motor accidents and appeals against awards.

Under National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680, a salaried deceased aged below 40 years is entitled to a 50% addition towards future prospects, subject to the applicable principles.

Under Sarla Verma v. Delhi Transport Corporation, (2009) 6 SCC 121, deduction towards personal expenses and the appropriate multiplier are determined with reference to the number of dependants and the deceased’s age.

The Court also relied on Magma General Insurance Co. Ltd. v. Nanu Ram, (2018) 18 SCC 130, for consortium under the conventional heads.

The Court further held that the deceased’s statutory income-tax liability must be deducted from the income available for determining loss of dependency.

The deceased’s monthly salary of ₹45,795 was established through the evidence of the Block Education Officer and salary slips, resulting in an annual income of ₹5,49,540.

Since he was a salaried employee aged 39 years, the Court added 50% towards future prospects, increasing the annual income to ₹8,24,310.

Applying the income-tax slabs for Assessment Year 2022–23, the Court calculated tax of ₹77,362 and determined the post-tax annual income at ₹7,46,948.

After deducting one-fourth for personal expenses, the annual contribution to the dependants was fixed at ₹5,60,211.

Applying a multiplier of 15, the loss of dependency was calculated at ₹84,03,165.

The Court also revised the conventional heads to ₹2,09,000, comprising ₹16,500 towards loss of estate, ₹16,500 towards funeral expenses, and ₹44,000 each towards consortium for four eligible claimants.

It recalculated the total compensation at ₹86,12,165, comprising ₹84,03,165 for loss of dependency and ₹2,09,000 under the conventional heads.

Accordingly, the Tribunal’s award of ₹92,73,488 was reduced to ₹86,12,165, while the remaining conditions of the award were maintained.

The appeal was partly allowed, and the Registry was directed to communicate the modified compensation amount to the claimants in Hindi, with assistance from paralegal workers if required.