Motor accident compensation must deduct income tax according to applicable slabs, not a flat percentage.

Late Vinod Tiwari, aged 59 years, sustained injuries in a motor accident on 13 July 2017 and died during treatment on 22 July 2017.

The Motor Accident Claims Tribunal awarded ₹67,03,977 to his claimants—his widow and two sons—and fastened liability on the appellant-insurance company.

The insurance company challenged the award, contending that the offending vehicle had been falsely implicated because the FIR was lodged on 31 July 2017, the eyewitness’s statement was recorded on 13 October 2017, and the vehicle was seized on 25 November 2017.

The Tribunal had assessed the deceased’s monthly income at ₹85,735, added 15% towards future prospects, deducted one-third towards personal expenses, applied a multiplier of 9, and awarded compensation under conventional heads.

Whether the offending vehicle was falsely implicated in the accident due to the delay in lodging the FIR, recording the eyewitness’s statement, and seizing the vehicle?

Whether the Tribunal erred by deducting only 10% towards income tax and whether the compensation required recomputation on the basis of the applicable income-tax slabs for financial year 2017–18?

In motor accident claim proceedings, the claimants are required to establish the accident and the involvement of the offending vehicle on the touchstone of preponderance of probabilities, and not beyond reasonable doubt, as held in Bimla Devi v. Himachal Road Transport Corporation, (2009) 13 SCC 530, and reiterated in Geeta Dubey v. United India Insurance Co. Ltd., 2024 INSC 998.

For computation of compensation, National Insurance Co. Ltd. v. Pranay Sethi, (2017) 16 SCC 680, governs the addition towards future prospects and conventional heads; Sarla Verma v. Delhi Transport Corporation, (2009) 6 SCC 121, governs deductions towards personal expenses and application of the multiplier; and Magma General Insurance Co. Ltd. v. Nanu Ram, (2018) 18 SCC 130, supports compensation under conventional heads.

Income tax must be deducted from the deceased’s annual income in accordance with the applicable statutory tax slabs for the relevant financial year.

The Court rejected the allegation of false implication because eyewitness Rajesh Kumar Dubey specifically identified the offending vehicle, his testimony remained unrebutted, and he was named in the police final report.

The charge-sheet was also directed against the vehicle.

The deceased’s treatment from 14 July to 22 July 2017 provided a factual explanation for the delay, and neither the owner/driver nor the insurer produced evidence to discredit the eyewitness or establish false implication.

Applying the preponderance-of-probabilities standard, the Court upheld the finding regarding the vehicle’s involvement.

On computation, the Court accepted the monthly income of ₹85,735 and the 15% addition for future prospects, resulting in an annual income of ₹11,83,143.

It then applied the financial year 2017–18 income-tax slabs and deducted ₹1,72,466, leaving a net annual income of ₹10,10,677.

After deducting one-third towards personal expenses, applying the multiplier of 9, and awarding ₹1,50,000 under conventional heads, the compensation was recalculated.

However, it held that the Tribunal had improperly deducted only 10% towards income tax.

The compensation was therefore reduced from ₹67,03,977 to ₹62,14,065.

The appeal was partly allowed to that extent, while the remaining terms and conditions of the Tribunal’s award were left undisturbed.