Question

After a government notification is issued for acquiring farmland under the Land Acquisition Act, 1894, the owner notices decreasing income from crops until possession is taken. What type of loss is compensable?

• A. Loss due to falling land prices in the market
• B. Loss due to cancellation of tenant agreements
• C. Loss of employment in nearby areas
• D. Bona fide diminution of profits due to acquisition process

Hint:

Only losses directly resulting from acquisition—not market fluctuations—are compensable.

Answer 1

The Correct Option is D

Step 1: Understanding compensable loss under the Act.
Section 23 allows compensation for damages directly arising from acquisition, including bona fide reduction of profits from land use.
Step 2: Application.
Reduced crop income directly related to acquisition interference qualifies as bona fide diminution of profits.
Step 3: Conclusion.
Thus, the compensable loss is bona fide diminution of profits.