Income Tax Liability Must Be Deducted While Assessing Loss of Dependency: Punjab and Haryana HC Directs Tata AGI to pay Enhanced Compensation [Read Order]
The Court directed the insurance company to pay the enhanced difference of ₹3,78,000/- to the claimants with interest at 7.5% per annum.
![Income Tax Liability Must Be Deducted While Assessing Loss of Dependency: Punjab and Haryana HC Directs Tata AGI to pay Enhanced Compensation [Read Order]](https://images.taxscan.in/h-upload/2026/05/20/2137601-income-tax-liability-tata-agi-enhanced-compensation-taxscan.webp "Income Tax Liability Must Be Deducted While Assessing Loss of Dependency: Punjab and Haryana HC Directs Tata AGI to pay Enhanced Compensation [Read Order]")
In a recent ruling, the Punjab and HaryanaHigh Court held that income tax liability must be deducted while assessing the loss of dependency in motor accident claims. The Court directed Tata AIG General Insurance Company to pay enhanced compensation to the claimants after recalculating the income by factoring in the tax deductions. The case involved appeals arising from a common...
In a recent ruling, the Punjab and HaryanaHigh Court held that income tax liability must be deducted while assessing the loss of dependency in motor accident claims. The Court directed Tata AIG General Insurance Company to pay enhanced compensation to the claimants after recalculating the income by factoring in the tax deductions.
The case involved appeals arising from a common award passed by the Motor Accident Claims Tribunal, Patiala, regarding the death of Raj Kumar in a vehicular accident. The claimants the widow and children of the deceased—had sought enhancement of compensation, while the insurance company appealed for a reduction, primarily arguing that the tax liability of the deceased was not deducted from the assessed income.
The claimants contended that the Tribunal had erred in treating the income reflected in the return for Assessment Year 2021-22 as the annual income. They argued that this return only covered earnings up to the date of the accident (approximately 9½ months) and that the average income should have been assessed by considering the returns of the previous year as well.
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The Insurance Company opposed the petition, submitting that the actual income tax liability of the deceased was liable to be deducted while determining the multiplicand for calculating compensation.
Justice Deepak Gupta perused the income tax returns on record and noted that the return for Assessment Year 2021-22 was indeed filed after the death of the deceased but covered a limited period. The Court calculated the average monthly income by taking the cumulative income of 21½ months from two assessment years and deducting the tax component.
The Court observed:
“This Court also finds merit in the submission advanced on behalf of the insurance company that the actual income tax liability of the deceased was liable to be deducted while determining the multiplicand. The said principle is now well settled and accordingly the net income has been assessed after deduction of the tax component.”
The High Court assessed the total compensation at ₹54,60,500/- after adding future prospects, deducting personal expenses, and accounting for medical and transportation costs. The Court directed the insurance company to pay the enhanced difference of ₹3,78,000/- to the claimants with interest at 7.5% per annum.
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