A recent judgment by the Supreme Court of India shook the legal landscape regarding the calculation of income for compensation in the case involving the deceased. The Court’s ruling on the inclusion of allowances like house rent allowance, flexible benefit plan, and company contributions has far-reaching implications. Stay tuned to learn about the details and implications of this groundbreaking decision.
Facts
- The High Court held that components like house rent allowance, flexible benefit plan, and company contributions should be excluded from the gross income calculation for future prospects.
- The reasoning by the High Court to exclude certain allowances was deemed erroneous by the Supreme Court.
- The house rent allowance is paid in proportion to the basic salary and increases with salary increments.
- The deceased’s gross salary for 2013 was determined at ₹4,88,982 based on the Annual Salary Review.
- The High Court applied future prospects of 50% to a basic salary figure of ₹2,30,652 per annum for loss of income calculation.
- Total loss of income including allowances was calculated at ₹6,20,967 by the High Court.
- The deductions for professional tax and income tax were considered in determining the deceased’s total annual income at ₹5,56,710 by the High Court.
- The compensation initially awarded by the Accident Claims Tribunal was later reduced by the High Court to ₹49,57,035 after re-assessment.
- The deceased passed away intestate and was survived by a sole dependent.
- As per the law, the deceased’s estate will be distributed to the sole dependent as the legal heir.
- The sole dependent is entitled to all assets, properties, and rights of the deceased as per the inheritance laws.
- The court has found in favor of the sole dependent and has ordered the distribution of the deceased’s estate to them.
Also Read: Judicial Review of Delimitation Orders: Upholding Constitutional Values
Analysis
- The High Court erred in reducing the compensation payable to the appellant from ₹1,04,01,000/- to ₹49,57,035/-
- The High Court failed to add house rent allowance, flexible benefit plan, and Company contribution to provident fund to the basic salary of the deceased when calculating rise in income by future prospects
- The statutory amount of tax must be deducted from the income amount considered for future prospects calculation
- A rational formula to fix the percentage of rise of income by future prospects has been established by the Court
- Perquisites and allowances, such as dearness allowance and house rent allowance, should be included in the income calculation for assessing rise in income due to future prospects
- House rent allowance is paid for the benefit of the family members and not for the employee alone.
- Dearness allowance and house rent allowance should be included for determining the income of the deceased for compensation purposes.
- Allowances such as transport allowance, house rent allowance, provident fund loan, provident fund, and special allowance must be added when considering the victim/deceased’s basic salary to calculate the dependency factor.
- Components of house rent allowance, flexible benefit plan, and company contribution to provident fund need to be included in the salary of the deceased for determining the dependency factor with a rise in income by future prospects.
- The term ‘income’ is defined as the value of any benefit obtained from a company by a person with substantial interest, occurring from a profession, trade, or calling.
- Income includes periodical receipts from one’s work, lands, investments, etc., and is not confined to business receipts only.
- Benefits received for the purpose of income tax should be considered in the calculation of total compensation payable, including perks that contribute to the family’s income.
- Employer-paid perks that benefit the deceased should be included in the monthly income calculation.
Also Read: Quashing of Complaint Case No. 85479 of 2022 in the Case of Industrial Dispute Violation
Case Title: MEENAKSHI Vs. THE ORIENTAL INSURANCE CO. LTD. (2024 INSC 573)
Case Number: C.A. No.-008473-008473 – 2024
