Income Tax Returns for the immediate preceding year must be the basis for assessing future loss of income.

On March 25, 2004, the original claimant was a passenger in a Maruti Car (No. GJ-17-C-6516) which turned turtle due to the rash and negligent driving of Respondent No. 1.

The 55-year-old claimant sustained multiple fractures, including to his thigh, nasal bone, zygoma, and femur, resulting in 14% functional disability.

The Motor Accident Claims Tribunal (MACT), Vadodara, awarded Rs. 2,76,900/- with 9% interest via judgment dated July 31, 2018.

The heirs of the deceased claimant appealed to the High Court of Gujarat seeking enhancement of the compensation, specifically challenging the Tribunal’s assessment of income and various conventional heads.

1. Whether the learned Tribunal erred in determining the annual income by averaging two years instead of considering the last income tax return filed before the accident.

2. Whether the claimant was entitled to an addition for future prospects and enhanced compensation under heads of pain and suffering, medical expenses, and actual loss of income.

The court primarily applied the principles of "just compensation" under the Motor Vehicles Act.

It specifically relied on the precedent established by the Hon’ble Supreme Court in Sarla Verma and Ors. v. Delhi Transport Corporation (2009) AIR (SC) 3104, which mandates that the last income of the claimant at the time of the accident should be the basis for computing compensation.

The court also applied standard actuarial principles regarding "future prospects" (adding 10% for the age group of 55) and the "multiplier method" to calculate future loss of income based on functional disability.

The High Court found that the Tribunal erred by averaging the claimant's income over two years. Following the Sarla Verma ratio, the Court held that the gross income of Rs. 1,04,486/- from the FY 2003-04 (Exh. 45) must be the starting point, from which income tax of Rs. 9,898/- was deducted to arrive at a net income of Rs. 94,588/-.

To this, a 10% addition for future prospects was made (totalling Rs. 1,04,047/-) and a multiplier of 11 was applied against the 14% functional disability.

Regarding non-pecuniary heads, the Court increased "Pain, shock & sufferings" from Rs. 20,000/- to Rs. 30,000/- and "Special diet, attendant & transportation" from Rs. 10,000/- to Rs. 20,000/-, noting the claimant’s prolonged hospitalization and multiple fractures.

Actual loss of income was recalculated using the corrected monthly income of Rs. 7,882/- for three months.

The Court maintained the interest rate of 9% per annum from the date of the claim petition. Respondent No. 3 (Insurance Company) was directed to deposit the additional amount within six weeks for subsequent disbursement to the appellants. Civil Application No. 2 of 2025 for additional evidence was dismissed as withdrawn.