Motor accident dependency compensation must be computed on salary after deducting applicable income tax.

On 17 September 2014, Bharatkumar and his friend were standing beside the highway after parking their motorcycle when a tanker, allegedly driven rashly and negligently by respondent No. 5, struck Bharatkumar. Bharatkumar died in the accident. His legal heirs filed a claim petition before the M.A.C.T., Tharad. The tanker was insured with Reliance General Insurance Co. Ltd.

The Tribunal partly allowed the claim petition and awarded the claimants compensation of ₹32,33,000 with interest at 9% per annum from the date of the claim petition until realization. The insurer challenged the award only on the quantum of compensation, while the claimants filed cross-objections seeking enhancement.

The deceased was a permanent police constable. His salary slip showed a monthly salary of ₹14,875, with ₹300 deducted towards tax. The Tribunal had assessed his monthly income at ₹14,000, added 50% towards future prospects, deducted one-third towards personal expenses, and awarded amounts under the conventional heads.

Whether the deceased’s monthly income was required to be reassessed after deducting the applicable tax from the salary shown in the salary slip?

Whether 50% or 40% should be added to the deceased’s income towards future prospects?

Whether the deduction towards the deceased’s personal expenses should be one-third or one-fourth, considering the number of dependants?

Whether the compensation awarded under loss of dependency, loss of consortium, loss of estate, and funeral expenses required enhancement?

The Court applied the principle in Sarla Verma v. Delhi Transport Corporation, 2009 (6) SCC 121, that “actual income” for computing loss of dependency means salary after deduction of applicable income tax, and that the appropriate deduction for personal expenses depends upon the number of dependants.

It also applied the rule that a permanent employee is entitled to an addition towards future prospects, accepting a 50% addition in the present case.

For conventional heads, the Court relied on National Insurance Co. Ltd. v. Pranay Sethi, AIR 2017 SC 5157, which prescribed the appropriate amounts for loss of estate and funeral expenses, and Magma General Insurance Co. Ltd. v. Nanu Ram @ Chuhru Ram, (2018) 18 SCC 130, concerning compensation for loss of consortium to the eligible claimants.

The Court found that the salary slip established a gross monthly salary of ₹14,875 and that ₹300 had been deducted towards tax. Applying the principle in Sarla Verma, it reassessed the deceased’s monthly income at ₹14,575.

Since the deceased was a permanent police employee, the Court upheld the Tribunal’s addition of 50% towards future prospects, resulting in a future monthly income of ₹21,862.

The Court further held that, as the deceased was survived by four dependants, the deduction towards personal expenses should be one-fourth rather than one-third.

It consequently assessed the loss of dependency at ₹35,41,536 by applying the multiplier of 18.

However, the judgment contains an apparent arithmetic inconsistency: although it states that one-fourth should be deducted, the stated figure of ₹16,396 corresponds approximately to a deduction of one-fourth from ₹21,862, while the accompanying bracketed calculation incorrectly refers to “less 1/3rd”.

The Court also enhanced loss of estate and funeral expenses from ₹16,500 each to ₹18,150 each, and loss of consortium from ₹1,76,000 to ₹1,93,600.

The total compensation was enhanced from ₹32,33,000 to ₹37,71,436, resulting in an additional award of ₹5,37,436.

The additional amount was directed to carry interest at 9% per annum from the date of filing of the claim petition until realization.

The insurer was directed to deposit the additional compensation and interest before the Tribunal within four weeks, after which the Tribunal was to disburse the awarded amount to the claimants subject to verification and deduction of any deficit court fee.