Income tax must be deducted from enhanced income when calculating loss of dependency.

On 13 June 2020, Aravint, aged 33, died from injuries sustained when an Eicher goods vehicle allegedly entered the wrong lane and collided with the Ford car in which he was travelling.

His legal heirs obtained an award of ₹58,85,000 from the Motor Accident Claims Tribunal, including ₹57,60,000 for loss of dependency.

The insurer appealed under Section 173 of the Motor Vehicles Act, 1988, challenging the income assessment, future-prospects addition, alleged contributory negligence, and quantum of compensation.

Whether the Tribunal was justified in fixing the deceased’s monthly income at ₹40,000.

Whether the Tribunal was justified in adding 50% towards future prospects.

Whether income tax should be deducted when calculating loss of dependency.

Section 173 of the Motor Vehicles Act, 1988 provides the basis for an appeal against a Claims Tribunal’s award.

The Court applied National Insurance Company Limited v. Pranay Sethi, (2017) 16 SCC 680, for the addition of future prospects; it held that a 50% addition was appropriate for this 33-year-old deceased.

The Court also treated deduction for income tax as necessary in calculating dependency, applying a 10% deduction to the enhanced monthly income in this case.

It applied a 50% deduction for the deceased bachelor’s personal expenses and a multiplier of 16 in recalculating dependency.

The Court upheld the ₹40,000 monthly income because the claimants produced salary slips and employment-related documents, and the insurer provided no contrary evidence.

It also upheld the 50% future-prospects addition in light of the deceased’s age and Pranay Sethi.

However, it found that the Tribunal had omitted an income-tax deduction. After deducting 10% from the enhanced monthly income of ₹60,000, the Court used ₹54,000 to calculate dependency: ₹54,000 × 12 × 16 × ½ = ₹51,84,000.

It reduced the award for loss of love and affection to ₹44,000 for each of the two claimants, while confirming ₹25,000 for funeral and transportation expenses.

Although contributory negligence was raised by the insurer, it was not included among the framed points for consideration or addressed in the Court’s determination.

The award was modified from ₹58,85,000 to ₹52,97,000, with interest at 7.5% per annum from the date of the claim petition until deposit.

The insurer was directed to deposit the modified amount, after crediting any sum already deposited, within eight weeks of receiving the judgment; the award otherwise remained unaltered, and there was no order as to costs.