Holding

Perquisites and allowances must be included in the deceased’s salary for calculating the rise in income by future prospects, and deduction of income tax from gross salary is permissible.

Summary

The appellant, Meenakshi, mother of Suryakanth who died in a road accident, claimed compensation under the Motor Vehicles Act, 1988. The Accident Claims Tribunal awarded Rs 1.04 crore based on the deceased’s gross monthly salary of Rs 50,942, which included house rent allowance, a flexible benefit plan and employer’s contribution to the provident fund, and applied a 50% rise in income by future prospects. The Karnataka High Court, on appeal by the insurer, reduced the award to Rs 49.57 lakh, holding that such perquisites should be excluded from the basic salary for calculating future prospects, though it allowed deduction of income tax. The Supreme Court held that house rent allowance, flexible benefit plan and PF contribution form part of the deceased’s income and must be included when applying the rise‑in‑income principle, while affirming the deduction of income tax. Accordingly, the High Court’s reduction was set aside and compensation was re‑calculated at Rs 93.66 lakh, and the appeal was partly allowed.

Issues considered

Whether perquisites/allowances such as house rent allowance, flexible benefit plan and employer's contribution to provident fund can be excluded from the basic salary for applying the principle of rise in income by future prospects under the Motor Vehicles Act, 1988.
Whether income tax may be deducted from the gross salary of the deceased while computing compensation.

Legislation cited

Motor Vehicles Act, 1988

Subjects

ClaimCompensationMACTArrear of rentLoss of dependencyPrinciple of rise in income by future prospectsHouse rent allowanceFlexible benefit planCompany contribution to provident fundIncome tax deductionBasic salary of the deceased

Judgment

[2024] 7 S.C.R. 1433 : 2024 INSC 573

Meenakshi
v.
The Oriental Insurance Co. Ltd.
(Civil Appeal No. 8473 of 2024)
23 July 2024

[Hima Kohli and Sandeep Mehta, JJ.]

Issue for Consideration

Whether perquisites/allowances in the nature of house rent
allowance, flexible benefit plan and company contribution to
provident fund can be excluded from the basic salary of the
deceased while applying the principle of rise in income by future
prospects for assessing compensation under the Motor Vehicles
Act, 1988.

Headnotes†

Motor Vehicles Act, 1988 – Claim for compensation –
Perquisites/allowances in the nature of house rent, flexible
benefit plan and company contribution to provident fund
cannot be excluded from the basic salary for the purpose of
applying future prospects – High Court erred in excluding
them – High Court justified in deducting Income Tax from
the gross salary of the deceased for calculating his gross
income – Appeal partly allowed:

Held: Claim for compensation by deceased’s mother – High Court
vide impugned judgment reduced compensation amount awarded
by Accident Claims Tribunal – It excluded the components of
house rent allowance, flexible benefit plan and contribution to
provident fund etc. from the gross income for the purpose of
applying future prospects – It also deducted income tax from the
gross salary – Appeal partly allowed – High Court erred in omitting
to add components of house rent allowance, flexible benefit plan
and company contribution to provident fund to the basic salary of
the deceased – However, High Court justified in deducting income
tax from the gross salary while calculating the gross income –
Compensation amount re-assessed. [Paras 12-15]
1434 [2024] 7 S.C.R.

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Case Law Cited
Raghuvir Singh Matolya and Ors. v. Hari Sigh Malviya and Ors.
[2009] 5 SCR 379 : (2009) 15 SCC 363; National Insurance
Company Ltd. v. Nalini and Ors., Special Leave to Appeal (C)
No. 4230/2019 – relied on.

List of Acts
Motor Vehicles Act, 1988.

List of Keywords
Claim; Compensation; MACT; Arrear of rent; Loss of dependency;
Principle of rise in income by future prospects; House rent
allowance; Flexible benefit plan; Company contribution to provident
fund; Income tax deduction; Basic salary of the deceased.

Case Arising From
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 8473 of 2024
From the Judgment and Order dated 02.08.2017 of the High Court
of Karnataka at Kalaburagi in MFA No. 200311 of 2016
Appearances for Parties
C.M. Angadi, Rameshwar Prasad Goyal, Advs. for the Appellant.
Arvind Gupta, Anil Kumar Sahu, Mohit Bidhuri, Mrs. Suman Sharma,
Kanav Bhardwaj, Sunil Kumar Roy, Advs. for the Respondent.
Judgment / Order of the Supreme Court

Order
1. Delay condoned.
2. Leave granted.
3. This appeal arises from the judgment dated 2nd August, 2017
rendered by the learned Division Bench of the High Court of
Karnataka, Kalaburagi Bench in M.F.A. No. 200311/2016 (MV)
whereby, while partly accepting the appeal preferred by the respondent
No. 1- Insurance Company,1 the High Court reduced the compensation

1 Respondent no. 2 was deleted vide order dated 28th August, 2023 by the Hon’ble Judge-in-Chamber
[2024] 7 S.C.R. 1435

Meenakshi v. The Oriental Insurance Co. Ltd.

awarded to the claimant i.e., Appellant herein vide award dated
25th November, 2015 passed by the Principal Senior Civil Judge
and MACT2 at Kalaburagi in a claim petition3 filed by the appellant
herein. The Accident Claims Tribunal had awarded compensation
to the tune of ₹ 1,04,01,000/- with interest @ 6% per annum to the
claimant i.e., the appellant herein being the mother of Shri Suryakanth
who expired in a road accident on 29th August, 2013. The Accident
Claims Tribunal, assessed and quantified the compensation in the
following manner:-
“16. Loss of Dependency: The petitioner is the mother
of deceased Suryakanth. Admittedly, the age of the
deceased is shown as 26 years in the post mortem report
as per Exh.P13, that is taken into account. Regarding
the income of the deceased, PW.1 has stated that the
deceased Suryakanth was doing as service consultant and
drawing monthly gross salary of Rs.56,935/- per month
and to prove the said fact she has produced Exh.P15
to Exh.P25 which are appointment letter, Salary review
letter, Salary certificates, certificate issued by CISCO,
PAN Card, Diploma Certificate, Income Tax Returns and
Form No.16 respectively, but as per Exh.P17 Salary
Certificate which is of the August 2013 of the deceased
which shows the total earning of the deceased is Rs.
50,942/-, so the said fact is taken into consideration for
awarding compensation amount, because as per the
income tax returns which are produced by the petitioner
it is seen the deceased was PAN cardholder and he was
paying income tax which shown that he was capable of
earning the amount which is shown in the Exh.P17 and
even though the deceased was working in a private limited
Company, the said salary amount is to be considered
because he is Diploma Certificate Holder and basing on
his efficiency the Company was paying the said amount
to him. So for salary of Rs. 50,942/- Professional Tax of
Rs. 200/- is deducted which comes to Rs. 50,742/- per
month. Therefore, in my opinion, it is feasible to consider

2 hereinafter being referred to as ‘The Accident Claims Tribunal’
3 MVC No. 887 of 2013
1436 [2024] 7 S.C.R.

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the income of the deceased @ 50,742/- and annual income
comes to Rs.6,08,904/-. As the deceased was unmarried
person, 50% of the said amount is to be deducted, it
comes to Rs.3,04,452/-. As per the recent decision of
the Hon’ble Apex Court reported in 2015 (3) TAC.1 (SC)
and case law reported in Sarla Varma and others V/s
Delhi Transport Corporation and another and Rajesh and
others, the deceased is also entitled for loss of future
prospects at 50% of his income. So, if 50% of the said
Income is added Rs.3,04,452/- It would be Rs.6,08,904/-
(3,04,452 + 3,04,452) per annum. Regarding the age of
the deceased, In the post mortem report as per Exh.P13
the age of the deceased is shown as 26 years. So, the
same is taken into consideration for applying multiplier
as per the case law reported in Sarla Verma and others
V/s Delhi Transport Corporation and another is “17”. The
calculation of the total loss of dependency is as under:
Rs.6,08,904 x 17 multiplier = Rs.1,03,51,368/-. The petitioner
is entitled for loss of dependency Rs.1,03,51,368/- .
Therefore, the petitioner is entitled for total compensation
under different heads as follows:

1. Loss of Love and Affection ₹ 25,000-00
2. Funeral Expenses ₹ 25,000-00
3. Loss of Dependency ₹ 1,03,51,368-00
Total Compensation Rounded ₹ 1,04,01,368-00
off ₹ 1,04,01,000-00
Therefore, the petitioner is entitled for total compensation
of Rs.1,04,01,000/- along with interest @ 6% per annum
from the date of petition till its realization.”
4. The High Court, while considering the appeal preferred by respondent
No. 1- Insurance Company, concluded that the Accident Claims
Tribunal’s approach while assessing the compensation under the
head of ‘loss of dependency’ was erroneous on various grounds.
It was held that the salary of the deceased, should be based on
the Annual Salary Review for the year 2013, according to which
his gross salary was ₹ 4,88,982/- (Rupees four lakh eighty eight
thousand nine hundred and eighty two only). This figure realistically
[2024] 7 S.C.R. 1437

Meenakshi v. The Oriental Insurance Co. Ltd.

reflects what the deceased-Suryakanth would have received for
the year 2013. The High Court took the basic salary of deceased-
Suryakanth @ ₹ 2,30,652/- (Rupees two lakh thirty thousand six
hundred and fifty two only) per annum for calculating the loss of
income and only on the said figure, the future prospects @50%
were applied, which worked out to ₹ 1,15,326/- (Rupees one lakh
fifteen thousand three hundred and twenty six only). As per the High
Court, the total loss of income, including the allowances worked
out to ₹ 6,20,967/- (Rupees six lakh twenty thousand nine hundred
and sixty seven only). From the said amount professional tax to the
tune of ₹ 2,400/- (Rupees two thousand four hundred only) and
Income Tax to the tune of @ ₹ 61,857/- (Rupees sixty one thousand
eighty hundred and fifty seven only) was deducted and hence, the
total annual income of the deceased-Suryakanth worked out to ₹
5,56,710/- (Rupees five lakh fifty six thousand seven hundred and
ten only) as per the High Court. The High Court in particular held
that the components of house rent allowance, flexible benefit plan
and contribution to provident fund etc. could not be accounted for
the purpose of adding 50% to the gross income of the deceased
on the principle of future prospects.
5. Multiplier of 17 was applied to the said figure and 50% from the
total income calculated as above was deducted towards personal
expenses considering the fact that the claimant, i.e., the appellant
herein, being the mother of the deceased, was the sole dependent
of the deceased. The net re-assessed compensation as calculated
by the High Court came out to ₹ 49,57,035/- (Rupees forty nine
lakh fifty seven thousand and thirty five only). Consequently, the
compensation awarded by the Accident Claims Tribunal was reduced
as above vide the impugned judgment dated 2nd August, 2017 which
is subjected to challenge by the claimant-appellant by way of this
appeal by special leave.
6. Having heard and considered the submissions advanced by learned
counsel for the parties and after going through the impugned
judgments and the record, we are of the opinion that the reasoning
assigned by the High Court, that the perquisites/allowances in the
nature of house rent, flexible benefit plan and Company contribution
to provident fund would have to be excluded from the gross income
for the purpose of applying future prospects, is erroneous on the
face of record. There cannot be any two views on the aspect that
1438 [2024] 7 S.C.R.

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these perquisites/allowances admissible to a salaried employee do
not remain static and continue to rise generally proportionate to the
length of the service of the employee. These allowances are generally
fixed on a pro rata basis with reference to the basic salary.
7. As per the service conditions and pay scales of the Government
officials, the house rent allowance is payable between 8% and 30%
of the basic salary. Therefore, the house rent allowance is paid in
a fixed ratio proportionate to the basic salary. With the increase in
basic salary, the quantum of house rent allowance also increases
proportionately. The flexible benefit plan and Company contribution
admissible to a person employed in private service would also not
remain static and are bound to increase with the length of service.
The only bone of contention in this appeal is whether perquisites/
allowances referred to above should also be taken into account while
applying the future prospects. Therefore, entirely excluding these
components from the salary of the employee for applying the principle
of future prospects would be unjustified. Consequently, we have no
hesitation in holding that these allowances cannot be ignored and
have to be added to the salary when assessing the rise in income
due to future prospects of a person employed in private service.
This Court has carved out a rational formula to fix the percentage
of rise of income by future prospects. In the case at hand, the said
percentage has been fixed at 50% by both, the Accident Claims
Tribunal as well as the Division Bench of the High Court. In view of
the discussion made supra, the perquisites/allowances have to be
added to the basic salary of the deceased before applying the rise
by future prospects.
8. In Raghuvir Singh Matolya and Others v. Hari Singh Malviya and
Others,4 this Court held that the house rent allowance ought to be
included for determining the income of the deceased. The relevant
paras are extracted hereinbelow for ready reference:-
“6. Dearness allowance, in our opinion, should form a part
of the income. House rent allowance is paid for the benefit
of the family members and not for the employee alone.
What would constitute an income, albeit in a different fact

4 [2009] 5 SCR 379 : (2009) 15 SCC 363
[2024] 7 S.C.R. 1439

Meenakshi v. The Oriental Insurance Co. Ltd.

situation, came up for consideration before this Court in
National Insurance Co. Ltd. v. Indira Srivastava [(2008) 2
SCC 763] wherein it was held:
“19. The amounts, therefore, which were required to be
paid to the deceased by his employer by way of perks,
should be included for computation of his monthly income
as that would have been added to his monthly income by
way of contribution to the family as contradistinguished to
the ones which were for his benefit. We may, however,
hasten to add that from the said amount of income,
the statutory amount of tax payable thereupon must be
deducted.
20. The term ‘income’ in P. Ramanatha Aiyar’s Advanced
Law Lexicon (3rd Edn.) has been defined as under:
‘(iii) the value of any benefit or perquisite whether
convertible into money or not, obtained from a company
either by a director or a person who has substantial interest
in the company, and any sum paid by such company in
respect of any obligation, which but for such payment
would have been payable by the director or other person
aforesaid, occurring or arising to a person within the State
from any profession, trade or calling other than agriculture.
’It has also been stated: ‘ “Income” signifies “what comes
in” (per Selborne, C., Jones v. Ogle [(1861-73) All ER Rep
918] ). “It is as large a word as can be used” to denote
a person’s receipts (per Jessel, M.R., Huggins, ex p.,
Re [51 LJ Ch 935] ). Income is not confined to receipts
from business only and means periodical receipts from
one’s work, lands, investments, etc. Secy. to the Board of
Revenue, Income Tax v. Al. Ar. Rm. Arunachalam Chettiar
& Bros. [AIR 1921 Mad 427] Ref. Vulcun Insurance Co.
Ltd. v. Corpn. of Madras [AIR 1930 Mad 626 (2)] .’
21. If the dictionary meaning of the word ‘income’ is taken
to its logical conclusion, it should include those benefits,
either in terms of money or otherwise, which are taken
into consideration for the purpose of payment of income
1440 [2024] 7 S.C.R.

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tax or professional tax although some elements thereof
may or may not be taxable or would have been otherwise
taxable but for the exemption conferred thereupon under
the statute.
To the same effect is the decision of this Court in Oriental
Insurance Company Limited v. Ram Prasad Varma and
Others [(2009) 2 SCC 712 : (2009) 1 SCC (Cri) 853 :
(2009) 1 Scale 598].
7. We, therefore, are of the opinion that “dearness
allowance” and “house rent allowance” payable to the
deceased should have been included for determining the
income of the deceased and consequently the amount of
compensation.”
(emphasis supplied)
9. Recently in a judgment dated 11th July, 2024 in National Insurance
Company Ltd. v. Nalini and Ors. [Petition for Special Leave to
Appeal (C) No. 4230/2019], this Court held that, allowances under
the heads of transport allowance, house rent allowance, provident
fund loan, provident fund and special allowance ought to be added
while considering the basic salary of the victim/deceased to arrive
at the dependency factor.
10. Therefore, components of house rent allowance, flexible benefit plan
and company contribution to provident fund have to be included
in the salary of the deceased while applying the component of
rise in income by future prospects to determine the dependency
factor. The Accident Claims Tribunal was justified in factoring these
components into the salary of the deceased, before applying 50%
rise by future prospects due to future prospects, while calculating
the total compensation payable to the appellant.
11. Clearly, the High Court erred in accepting the appeal filed by the
respondent No. 1- Insurance Company and reducing the compensation
payable to the appellant from a sum of ₹ 1,04,01,000/- (Rupees One
crore four lakh one thousand only) awarded by the Accident Claims
Tribunal to ₹ 49,57,035/-(Rupees Forty nine lakh fifty seven thousand
and thirty five only).
[2024] 7 S.C.R. 1441

Meenakshi v. The Oriental Insurance Co. Ltd.

12. We, therefore, hold that the High Court has erred while omitting to
add the components of house rent allowance, flexible benefit plan
and Company contribution to provident fund to the basic salary of
the deceased while applying the principle of rise in income by future
prospects.
13. However, we are of the opinion that the High Court was justified
in deducting Income Tax from the gross salary of the deceased-
Suryakanth for calculating his gross income. This factor was
overlooked by the Accident Claims Tribunal while quantifying the
award.
14. As a result, the re-assessed compensation payable to the appellant
after making deduction towards Income Tax is tabulated in the
following manner: -

S. No. Heads Amount
1. Loss of Dependency
Monthly Salary of the Deceased - -
₹ 50,942/- (inclusive of house rent
allowance, flexible benefit plan and
contribution to provident fund).
(Less) Professional Tax of ₹ 200/month ₹ 50,742/-
to be deducted (₹ 50,942-₹ 200)
(Less) Income Tax @ 10% as per 2013- ₹ 45,668/-
2014 i.e., Rs. 5,074 (₹ 50,742 – ₹ 5,074)

Annual Gross Income (₹ 45,668 x 12) ₹ 5,48,016/-
(Less) 50% to be deducted towards ₹ 2,74,008/-
dependency as the deceased was
unmarried (₹ 5,48,016 – ₹ 2,74,008)
(Add) 50% to be added towards rise in ₹ 5,48,016/-
income by future prospects (₹ 5,48,016
+ ₹ 2,74,008)
Total Loss of Dependency = ₹ 5,48,016 ₹ 93,16,272/-
X 17 (Multiplier as the deceased age
was 26)
1. Funeral Expenses ₹ 25,000/-
2. Loss of Love and Affection ₹ 25,000/-
Total Compensation ₹ 93,66,272
1442 [2024] 7 S.C.R.

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15. The impugned judgment dated 2nd August, 2017 passed by the
Division Bench of the High Court is thus, reversed. The appeal is
partly allowed on the above terms. Costs made easy.

Result of the case: Appeal partly allowed.

†
Headnotes prepared by: Aishani Narain, Hony. Associate Editor
(Verified by: Shibani Ghosh, Adv.)