The Supreme Court clarified that for computing compensation in motor accident claims, the deceased’s income includes all allowances, regardless of taxability. Future prospects for a permanent employee below 40 are to be added at 50%. Income tax deduction, if applicable, must be calculated as per the actual tax slab rates for the relevant year.
Facts Of The Case:
The case originated from a motor accident claim filed by the dependents of a 27-year-old engineer employed with the Power Grid Corporation of India, who died in an accident. The Motor Accident Claims Tribunal awarded compensation of approximately ₹88.20 lakhs. This computation included his full monthly salary of ₹53,367 (comprising basic pay, DA, and other allowances), applied a multiplier of 18, added 50% for future prospects, and awarded conventional heads. The insurance company appealed to the Patna High Court, which significantly reduced the compensation to about ₹38.15 lakhs. The High Court excluded the allowances from the income calculation, applied a lower multiplier of 17, added only 40% for future prospects, and made a flat 30% deduction for income tax. Aggrieved by this reduction, the dependents appealed to the Supreme Court, challenging the High Court’s methodology, particularly the exclusion of allowances and the arbitrary tax deduction. The Supreme Court’s ruling centered on rectifying these computational errors to determine the just compensation payable.