Dr. Narahari Nageswara ... vs M/S. L.T.C. Logistics Pvt. Ltd., ...
2021 Latest Caselaw 1208 AP

     THE HON'BLE SRI JUSTICE U.DURGA PRASAD RAO
                                 AND
             HON'BLE MS. JUSTICE J. UMA DEVI

                    M.A.C.M.A.No.1532 of 2011

JUDGMENT: (Per Hon'ble Sri Justice U.Durga Prasad Rao)

      Challenging the award dated 12.05.2011 in M.V.O.P.No.241 of

2008 passed by the Chairman, Motor Accidents Claims Tribunal-cum-

III Additional District Judge, Nandyal, awarding a compensation of

Rs.13,54,420/- with proportionate costs and interest at 6% p.a. against

the claim of Rs.55.00 lakhs, the claimants preferred the instant

M.A.C.M.A.


2.    The claimants are parents of the deceased Narahari Prashanth

who died on the night of 17.09.2006 while his motor cycle bearing

No.TN 20H 2885 was hit behind by a lorry bearing No.HR 38K 8869.

The claimants pleaded that the deceased was aged 27 years and

working as Software Engineer in Kanbay Softward (I) Private

Limited, Hyderabad and getting monthly salary of Rs.27,098/- and

due to his untimely death, which was caused by the rash and negligent

driving of the driver of the lorry, they lost their son and future

supporter. They laid the claim against respondent Nos.1 and 2, who

are the owners of the offending lorry, and the 3rd respondent who is its

insurer.

3. While respondent Nos.1 and 2 remained ex parte, the 3rd

respondent alone contested the O.P. and repudiated its liability mainly 2 UDPR,J & JUD,J MACMA No.1532 of 2011

on the ground that the lorry driver was not at fault and that he did not

have valid and effective driving licence at the time of the accident.

4. The Tribunal, upon consideration of the facts and evidence on

record, held that the accident was occurred due to the fault of the lorry

driver and granted compensation as follows:

Sl.No. Description of head Awarded amount (Rs.) 1 Compensation for death of Narahari Prashanth 17,88,468-00 Monthly salary of Rs.27,098 - ½ = Rs.13,549 Rs.13,549 x 12 = Rs.1,62,588/-

Rs.1,62,588 x 11 multiplier = 17,88,468/-

2       Funeral expenses                                          5,000-00
        Total (Rs.)                                           17,93,468-00

From the above amount, the Tribunal deducted a sum of Rs.4,39,048/-

towards income tax payable on the compensation and granted the net

amount of Rs.13,54,420/- as compensation with proportionate costs

and interest at 6% p.a. from the date of O.P. till the date of realization.

Hence the M.A.C.M.A.

5. Heard arguments of learned counsel for the appellants Sri J.

Janaki Rami Reddy and Sri C. Prakash Reddy learned counsel for the

3rd respondent.

6. Learned counsel for the appellants firstly argued that the

Tribunal committed an error in accepting the age of mother of the

deceased for fixing multiplier instead of the age of the deceased. He

argued that the age of the deceased should be the basis for applying

multiplier. In this regard, he placed reliance on the decisions of 3 UDPR,J & JUD,J MACMA No.1532 of 2011

Hon'ble Apex Court in National Insurance Company Limited Vs.

Pranay Sethi and others1 and Chikkamma and others Vs.

Parvathamma and others2.

Nextly he argued that the Tribunal committed a grave error in

deducting income tax from the compensation amount. He vehemently

argued that compensation cannot be termed as income. He placed

reliance on the decision of the High Court of Madras in the Managing

Director, Tamilnadu State Transport Corporation (Salem) Ltd., Vs.

Chinnadurai3. He however fairly admitted that while accepting the

income of the deceased for computation of compensation, statutory

taxes payable by him including income tax shall be deducted and net

salary alone should be taken up. In this regard, he referred to the

decision in Panay Sethi case (1 supra).

7. In his turn, Sri C. Prakash Reddy, learned counsel for the 3rd

respondent/Insurance Company admitted that compensation amount is

not exigible to income tax and the Tribunal committed an error in that

regard. He however would argue that though compensation amount is

not taxable, the interest awarded on the said amount, if exceeds

Rs.50,000/- in a financial year, the same is liable for tax and the

Insurance Company has to make TDS before depositing compensation

and interest. He relied upon the decision of the High Court of

MANU/SC1366/2017=AIR 2017 SC 5157

MANU/SC/0680/2017=AIR 2017 SC 1732

MANU/TN/0981/2016=AIR 2016 Mad 146 4 UDPR,J & JUD,J MACMA No.1532 of 2011

Madhya Pradesh (Indore Bench) in United Insurance Company Ltd.

Vs. Ramlal and others4.

8. The points for consideration are:

1) Whether the age of the deceased bachelor or his dependent (mother in this case) is to be taken for selection of multiplier?

2) Whether compensation awarded in motor vehicle accident cases is liable for income tax?

3) Whether the interest awarded on compensation is liable for income tax?

4) To what relief?

9. Point No.1 : Admittedly the deceased was a bachelor. The

Tribunal having regard to the age of his mother/2nd appellant as 51

years, selected '11' as multiplier. It must be noted that in Pranay

Sethi case (1 supra) and Chikkamma case (2 supra) the Apex Court

has observed that the age of the deceased for the purpose of selection

of multiplier should be taken. Therefore, following the same we are

of the view that the age of the deceased should be taken as basis for

selection of multiplier. The deceased was stated to be 27 years old as

on the date of the accident. Hence, following the multiplier table

prescribed in Sarla Verma v. Delhi Transport Corporation5, '17' is

selected as multiplier.

10. Point Ns.2 & 3: So far as the applicability of income tax to the

compensation awarded to the victims to the motor vehicle accidents is

concerned, in Managing Director, Tamilnadu State Transport

MANU/MP/0841/2010=2012 ACJ 1157

2009 ACJ 1298 = MANU/SC/0606/2009 5 UDPR,J & JUD,J MACMA No.1532 of 2011

Corporation (Salem) Ltd. case (3 supra), the High Court of Madras

dealt with the question whether the victim, who is awarded

compensation, is liable to pay income tax on the compensation and the

interest accrued thereon. It posed a question whether the

compensation awarded by the Motor Accidents Claims Tribunal to the

victim can be classified as taxable income under the Income Tax law.

The High Court of Madras answered the question in the negative with

observation that the compensation cannot be categorized or even

described as income because the intention of the legislature in

awarding compensation to the victims of motor accident cases is to

restitute them and rehabilitate them. If there is a conflict between the

social welfare legislation and a taxation legislation, it is to be viewed

that the social welfare legislation should prevail since it sub-serves

larger public interest and the Motor Vehicle Act is one such

legislation which has been passed with a benevolent intention. The

Madras High Court has ultimately held thus:

"18. Hence, with due respect I am unable to concur with the findings of the Karnataka High Court, the Chhattisgarh High Court and this Court cited by the Revision Petitioner. This Court is of the view that the Division Bench judgment of the Himachal Pradesh high Court and the judgment of the Single Judge of the Punjab and Haryana High Court lay down the right law and hence, this Court arrives at the conclusion that the compensation awarded or the interest accruing therein from the compensation that has been awarded by the Motor Accident Claims Tribunal cannot be subjected to TDS and the same cannot be insisted to be paid to the Tax Authorities since the compensation and the interest awarded therein does not fall under the term 'income' as defined under the Income Tax Act, 1961."

We subscribe the similar view as that of the Madras High

Court. The object behind awarding compensation is only to restore

an injured or the legal representatives of a deceased, who met with an 6 UDPR,J & JUD,J MACMA No.1532 of 2011

accident, to such financial position which they would have been, had

there been no accident, and this exercise is not to confer on them any

windfall. Therefore, the compensation amount cannot be equated

with the income as defined in the Income Tax Act to subject to tax.

Therefore, we differ with the judgment of the High Court of Madhya

Pradesh (Indore Bench) in Ramlal case (4 supra) cited by the learned

counsel for the respondents. Consequently we hold that the Tribunal

committed grave error in deducting income tax from the

compensation awarded by it. Instead, it ought to have deducted

income tax from the salary of the deceased if it comes within the

taxable purview.

11. Point No.4 : Taking the above findings into consideration, now

the compensation has to be fixed. The deceased was earning a salary

of Rs.27,098/- per month. His gross annual income is Rs.3,25,176/-

(27098 x 12). During the Financial Year 2005-06, the above income

is taxable and hence, the income tax has to be deducted as follows:

Income Tax for Rs.3,25,176/-

Gross annual income                              3,25,176
Basic exemption - 1,00,000

From Rs.1 to Rs.1,50,000 (10%)
(50,000 x 10%)                           5,000
From Rs.1,50,001 to Rs.2,50,000 (20%)
(1,00,000 x 20%)                        20,000

30% on Rs.75,176         22,500
                         ______
Total income tax payable 47,500
                                      7                     UDPR,J & JUD,J
                                                      MACMA No.1532 of 2011

Thus, after deducting the income tax, the net annual salary of

the deceased is Rs.2,77,676/- (3,25,176 - 47,500). From this amount

1/2 is to be deducted towards personal and living expenses by

following the Sarla Verma case (5 supra). The net contribution of the

deceased comes to Rs.1,38,838/-. The said amount is to be multiplied

with the multiplier '17' to get the loss of dependency which comes to

Rs.23,60,246/- (1,38,838 x 17). Thus, the total compensation payable

to the claimants is as follows:

         Loss of dependency       : 23,60,246
         Funeral expenses                5,000
                                    -------------
                                     23,65,246
                                    -------------

12. In the result, this appeal is allowed and compensation is

enhanced from Rs.13,54,420/- to Rs.23,65,246/- with proportionate

costs and interest @ 7.5% per annum from the date of O.P. till the

date of realization and the respondents are directed to deposit

compensation amount within two (2) months from the date of this

judgment, failing which execution can be taken out against them. No

costs.

As a sequel, interlocutory applications, if any, pending for

consideration shall stand closed.

_________________________ U. DURGA PRASAD RAO, J

______________ J. UMA DEVI, J 01.03.2021 CBS/MVA