IN THE SUPREME COURT OF INDIA          Reportable  

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 5316   OF 2010 (Arising out of SLP (C) No.668/2008)

Shyamwati Sharma & Ors.                                                … Appellants

                Vs.

Karam Singh & Ors.                                                     … Respondents

J U D G M E N T  

R. V.  RAVEENDRAN J.,  

Leave granted.  

2. This  is  an appeal  for enhancement  of compensation,  by the mother,  

widow,  three  children  and  father  of  Kuldeep  Sharma,  a  Sub-Inspector  of  

Police,  aged  36  years,  who  died  in  a  motor  accident  on  25.12.1990.  

According  to  the  salary  certificate,  his  basic  pay  was  Rs.7425/-,    the  

gross salary (pay and allowances) was Rs.13,794/-, the deductions aggregated  

to Rs.4,305/- and the net take home salary was Rs.9,489/- per month.

3. The Tribunal by its award dated 17.1.2003 held the respondents liable  

and  directed  the  insurer  to  pay  to  the  appellants,  Rs.14,44,600/-  as  

compensation, with simple interest at  9% per annum from the date of filing  

of the claim petition (21.2.2002) till realization. The Tribunal arrived at the  

said compensation in the following manner : It deducted one third from the  

gross monthly salary of Rs.13,794/- towards the personal and living expenses  

of the deceased and determined the contribution to the family as Rs.9,196/-  

per month or Rs.1,10,352/-  per annum. It  applied the multiplier   ‘13’ and  

arrived  at  the  loss  of  dependency  as  Rs.14,34,576/-  rounded  off  to  

Rs.14,34,600/-.  

4. Feeling aggrieved the claimants filed an appeal. The High Court started  

with the gross salary as Rs.13,794/- per month. Drawing an assumption that  

the deceased would have at least got one promotion or gone to the next higher  

grade if he had completed the remaining 24 years of service, and taking note  

of  the  recommendations  of  the  Fifth  Pay  Commission  and  the  annual  

increments, it inferred that by the time the deceased would have retired, he  

would have been earning a minimum gross income of Rs.22,000/- per month.  

The average of  the actual  monthly income (Rs.13794/-)  and the projected  

monthly income   at the time of retirement (Rs.22000), that is Rs.17,897/-,

was taken as the  monthly income. The High Court  deducted 30% thereof  

towards  ‘deductions  from salary’  (income-tax  etc.)  and  arrived  at  the  net  

monthly  income  as  Rs.12,528/-.  It  further  deducted  one  fourth  thereof  

towards the personal and living expenses of the deceased and arrived at the  

contribution  to  the  family  as  Rs.9,396/-  per  month  or  Rs.1,12,752/-  per  

annum. By applying the multiplier of 13, it calculated the loss of dependency  

as Rs.14,65,776/-. As a consequence, it increased the compensation awarded  

by the Tribunal by Rs.32,000/- with interest at the rate of 6% per annum from  

the date of claim petition till the date of payment.  

5. The said judgment of the High Court is challenged in this appeal. The  

appellants urged the following two contentions :  

(i) The High Court ought not to have made a ‘deduction’ of 30% from the  

salary towards taxes etc.; and

 (ii) The High Court ought to have applied the multiplier ‘16’ instead       of  

‘13’, having regard to the age of the deceased.   

6. This Court in Sarla Verma vs. Delhi Transport Corporation – 2009 (6)  

SCC 121, has stated the principles relating to ‘addition to income’ towards  

future prospects. This Court held that wherever the deceased was below 40  

years of age and had a permanent job, the actual salary (less tax) should be

increased by 50% towards future prospects, to arrive at the monthly income.  

It also held that where the number of dependants of a deceased are in the  

range of 4 to 6, the deduction towards personal and living expenses of the  

deceased should be 25%. It further held that in regard to persons aged 36 to  

40 years, the appropriate multiplier  should be 15. We will re-calculate the  

compensation by applying the said principles.  

7. As  noticed  above,  the  gross  salary  was  Rs.13,794/-  per  month  or  

Rs.1,65,528/- per annum. By adding 50% towards future prospects (as the  

deceased was less than 40 years of age),  the deemed gross income would  

have been Rs.20,691/- per month or Rs.2,48,292/- per annum. The percentage  

of deduction towards income-tax and surcharge, taken as 30% by the High  

Court, does not require to be disturbed, having regard to the income. On such  

deduction,  the  net  annual  income  of  the  deceased  would  have  been  

Rs.1,73,800/-.  From  the  said  sum,  one-fourth  (25%)  had  to  be  deducted  

towards  the  personal  and  living  expenses  of  the  deceased.  Thus  the  

contribution of the deceased to his family would have been Rs.1,30,350/- per  

annum. By applying the multiplier of 15, the total loss of dependency will be  

Rs.19,55,250/-.  By adding a sum of Rs.5,000/- each under the heads of loss  

of consortium, loss of estate and funeral expenses, the total compensation is

determined as Rs.19,70,250/-.  

8. The submission of the respondents that the deduction of 30% from the  

salary is not warranted in view of the decision in Sarla Verma, is not sound.  

In Sarla Verma, the monthly salary of the deceased was only Rs.4004/- and  

the annual income even after taking note of future prospects was Rs.72072/-.  

The income was in a range which was exempt from tax, if the permissible  

deductions were applied. Therefore, this Court did not make any deduction  

towards  income-tax.  But  this  Court  made  it  clear  that  where  the  annual  

income is in the taxable range, appropriate deduction should be made towards  

tax. In this case as the annual income has been worked out as Rs.2,48,292/-,  

appropriate deduction has to be made towards income-tax. The rate of income  

tax is a varying figure, with reference to taxable income after permissible  

deductions  and  the  year  of  assessment.  The  High  Court  has  assessed  the  

deduction  as  30% and on the  facts,  we do not  propose  to  disturb it.  We  

however make it clear that while ascertaining the income of the deceased, any  

deductions shown in the salary certificate as deductions towards GPF, life  

insurance premium, repayments of loans etc., should not be excluded from  

the income.  The deduction towards  income tax/surcharge  alone should  be  

considered to arrive at the net income of the deceased.

9. We accordingly allow the appeal and increase the compensation from  

Rs.14,66,600/- to Rs.19,70,250/-. The increased amount shall carry interest at  

the  rate  of  6% per  annum from the date  of  claim petition  to  the  date  of  

payment.  The parties to bear their respective costs.  

__________________J.        (R. V. Raveendran)

__________________J. (H. L. Gokhale)  

New Delhi;  July 13, 2010.