Future Prospects To Be Computed At 50% When Deceased Was Aged Below 40 Years: Supreme Court Allows Motor Accident Claimants’ Appeal

The Apex Court was considering an appeal arising out of a judgment of the Patna High Court whereby the compensation awarded by the XIth Additional District and Sessions Judge – cum - Motor Accident Claims Tribunal was reduced from Rs 88,20,454 to Rs 38,15,499.

The Bench of Justice Pamidighantam Sri Narasimha and Justice Manoj Misra held, “The deceased was an Engineer employed with Power Grid Corporation of India, which is a public sector undertaking. There is no material to indicate that his job was not permanent in nature or that he was on a contract for a limited period. In such circumstances, in our view, addition for future prospects would have to be at the rate of 50% considering that deceased was aged below 40 years at the time of accident. Therefore, the High Court was not justified in adding future prospects at the rate of 40% in place of 50% as awarded by the Tribunal.”

Advocate Aditya Kumar represented the Appellants, while AOR Amrreeta Swaarup represented the Respondent.

Reasoning

The Bench, at the outset, noted that the age of the deceased at the time of the accident, which, as per the finding returned by the Tribunal, not disturbed by the High Court, was 27 years. Therefore, according to the Bench, the multiplier of 17, adopted by the High Court, was correct. The Bench noted that the High Court while computing the compensation, excluded the allowances payable as per the last pay slip and gave future prospects at the rate of 40% in place of 50% as was given by the Tribunal. The High Court also made a flat deduction of 30% towards income tax.

The Bench also held, “As regards deduction towards income tax is concerned, same is permissible in view of the decision of this Court in Ranjana Prakash (supra). However, in our view, deduction towards income tax should be at such rate which the annual income may be subjected to in the relevant year. It is not demonstrated that the allowances received were exempt from income tax.”

The Bench referred to the judgment in National Insurance Company Ltd. v. Nalini & Ors.(2024) where it was held that the emoluments and the benefits accruing to the deceased under various heads for computation of loss of income, ought to be included irrespective of whether they are taxable or not. “Thus, in our view, the High Court erred in excluding the allowances from the computation to arrive at the multiplicand. Hence, the total monthly income was rightly computed by the Tribunal at Rs.53,367”, it stated.

The Bench noticed that while computing compensation deduction towards income tax is to be made, as held in Ranjana Prakash & others v. Divisional Manager & another (2011). Considering that the nature of allowances had not been disclosed, the Bench included them in the annual income and computed the annual income as Rs. 6,40,400 (approximately) for the purposes of tax. “The tax payable in the relevant year (i.e., with reference to the date of death) would be Rs.62,080 (Tax: Nil up to Rs. 1.60 lacs; Rs.34,000 @ 10% up to Rs.5.00 lacs; and Rs.28,080 @ 20% up to Rs.6,40,400). Thus, net annual income from salary after deduction of income tax, with the allowances, would be Rs.5,78,324”, it held.

Thus, allowing the appeal, the Bench modified the order of the High Court by enhancing the compensation payable to the appellants to Rs 74,43,631 with a direction that the aforesaid compensation shall carry interest @ 6% per annum from the date of the claim petition till the date of actual payment.

Cause Title: Manorma Sinha v. The Divisional Manager, Oriental Insurance Company Limited (Neutral Citation: 2025 INSC 1237)

Appearance

Appellants: Advocate Aditya Kumar, AOR C. George Thomas

Respondent: AOR Amrreeta Swaarup

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