Chhattisgarh HC Upholds ₹37.74L Compensation To Accident Victim's Mother, Says No Tax Deduction Below ₹5L

The Chhattisgarh High Court on 20 August held that income tax need not be deducted while calculating motor accident compensation if the deceased's income falls within the Rs. 5 lakh limit eligible for rebate under Section 87A of the Income Tax Act.

Justice Sanjay Kumar Jaiswal upheld the Motor Accident Claims Tribunal's decision not to deduct tax from the deceased's annual income of Rs. 4,34,970, including 50% towards future prospects, and dismissed his mother's appeal seeking enhancement of compensation. The Bench held:

“For the Financial Year 2020-2021 (Assessment Year 2021-2022), individuals with a total taxable income up to Rs. 5,00,000/- received a tax rebate under Section 87A of the Income Tax Act. Therefore, the decision not to deduct tax from Rs. 4,34,970/- is legally sustainable.”

The case arose after Ayush Singh, aged 26, died in a road accident on 30 December 2020. He was working as an Assistant Grade III in the Chhattisgarh State Health Department. His mother approached the Claims Tribunal seeking compensation.

The Tribunal took Singh's monthly income at Rs. 24,165 based on his salary slip. After making deductions and adding 50% towards future prospects, it awarded his mother total compensation of Rs. 37,74,245. She then approached the High Court seeking enhancement of the compensation.

The insurance company opposed the appeal, arguing that the Tribunal had awarded higher compensation because it had not deducted income tax while calculating Singh's income.

Rejecting the objection, the High Court noted that Singh's annual income after adding 50% towards future prospects came to Rs. 4,34,970. Since income up to Rs. 5 lakh was eligible for rebate under Section 87A for the relevant financial year, the Court held that the Tribunal was justified in not making any tax deduction.

The Bench further found that the compensation awarded under other heads, including loss of estate, funeral expenses and filial consortium, was not inadequate. It held that the Tribunal had correctly followed the principles laid down by the Supreme Court in Pranay Sethi, Sarla Verma and Magma General Insurance.

Accordingly, the High Court dismissed the mother's appeal and upheld the compensation of Rs. 37.74 lakh.

For Appellant/Claimant: Mrs. Dhaneshwari Patel, Advocate, on behalf of Mr. Pushpendra Kumar Patel, Advocate

For Respondent No.3/Insurance Company: Mr. Dashrath Gupta, Advocate