The Delhi High Court has reaffirmed that the Motor Accident Claims Tribunal (MACT) must deduct applicable income tax and other permissible statutory deductions from the gross income of the deceased while computing compensation payable to the family. This clarification came in the case Universal Sompo General Insurance Co. Ltd. v. Dinesh Kumar Singh & Ors. (MAC.APP. 106/2025), decided by Justice Amit Mahajan.
The case arose after a fatal accident on July 6, 2019, when Sanjeev Kumar Singh and his father were hit by a truck near Surajkund Pali Road. Sanjeev sustained severe head injuries and was declared dead upon arrival at the hospital. An FIR under Sections 279 and 304A IPC was registered, and charges were filed against the truck driver.
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Following this, the MACT awarded compensation of ₹49,82,740/- to the legal heir of the deceased with 7.5% annual interest. Dissatisfied with the compensation quantum, the Insurance Company appealed, contending that the Tribunal had erred by not deducting the applicable 5% income tax from the deceased’s annual income of ₹4,11,600/-.
"It was contended that the Tribunal failed to deduct income tax, despite the deceased falling under the taxable income bracket at the time of the accident."
The Court referred to the Supreme Court’s judgment in Sarla Verma v. Delhi Transport Corporation (2009), which held that the net income after tax should be considered for compensation. The Court also cited Vimal Kanwar v. Kishore Den (2013), reinforcing that tax must be deducted when income falls under the taxable range.
However, Justice Mahajan noted that while the deceased's gross income was indeed ₹4,11,600/-, various deductions such as standard deduction (₹50,000/-) and House Rent Allowance benefits must be applied.
"After applying standard deductions and considering house rent allowance benefits, the Court found that the net income fell below the taxable threshold of ₹2,50,000/-."
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Thus, the High Court concluded that the net income of the deceased would be around ₹2,50,000/- and not subject to income tax for the financial year 2019-20, as per the applicable tax slabs. It also emphasized the importance of just compensation under the Motor Vehicles Act.
"The Motor Vehicles Act is a beneficial legislation. The goal is to provide fair compensation to victims or their families who suffer irreparable loss due to motor accidents."
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Further, the Court acknowledged the need to consider both compassion and objectivity while calculating compensation. It found no error in the Tribunal’s award and dismissed the appeal.
"Considering the deductions, the deceased's income was rightly assessed by the Tribunal, and hence, no interference with the award was necessary."
Case Title: Universal Sompo General Insurance Co. Ltd. v. Dinesh Kumar Singh & Ors.
Case No.: MAC.APP. 106/2025
Appearance for Appellant: Mr. Rajat Khattry, Advocate
