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TMI Blog2024 (11) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessing Officer, MUMW- (413)(91), Mumbai, u/s. 143(3) of the Income-tax Act (hereinafter referred to as the Act ), dated 21.09.2022 for Assessment Year 2020- 21. 2. The moot point raised by the assessee in the present appeal is in respect to income derived from cultivation and sale of white button mushrooms whether to be treated as business income instead of agricultural income, reported by it within the meaning to section 10(1) of the Act. In the alternate, assessee has also raised a ground that ld. Assessing Officer ought to have allowed the expenditure incurred in cultivation of white button mushrooms and also the depreciation from the gross sales. 3. Brief facts of the case are that assessee is a Private Limited Company engaged in cultivation and sale of edible white button mushrooms. It was incorporated in 2013 and owns approximately 36.5 acres of land in Kurnool District of Andhra Pradesh. Assessee cultivates mushrooms by way of soil based 'vertical' farming in a controlled environment. Assessee filed its return of income at 16.12.2020 reporting total income of Rs. 68,223/- on account of interest income after showing gross agricultural receipts at Rs. 22,27,04,01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come as agricultural income have been complied with by the assessee. According to it, firstly, the revenue earned by the assessee has been derived from land situated at Kurnool which is used specifically for agricultural purpose and is situated in India. Secondly, it had adopted all such activities which are ordinarily employed by a cultivator so as to render the product marketable. Lastly, assessee has not performed any other additional activity other than those which are essential to transport the mushrooms in order to sell the same in the market. Hence, assessee fulfilled all the parameters under section 2(1A) of the Act and thus, the income earned from sale of mushrooms is agricultural income, exempt under section 10(1) of the Act. 4.1. According to assessee, ld. Assessing Officer failed to consider the clarification issued by the Ministry of Agriculture vide Notification No. D.O. No.6-9 96-Hort. dated 12th Sept., 1997, wherein it has been clarified that mushroom production be treated as agricultural activity and that mushrooms are an agricultural commodity. 4.2. In order to justify the claim u/s. 10(1) of the Act, assessee strongly submitted that meaning of the word 'land& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st in 13-21 days. The Harvesting is done in 2-3 flushes (picking). 4.4. In view of the above, assessee submitted that the abovementioned activities/process together constitutes an agricultural activity and the income derived out of the said process is agricultural in nature. Hence, ld. Assessing Officer is not justified in treating the income derived from the above-mentioned process as business income. 4.5. In terms of section 2(1A), assessee contended that an income qualifies as an agricultural income on the fulfilment of the following conditions: a. The revenue shall be derived from land which is situated in India and is used for agricultural purposes. b. The cultivator of the land shall only adopt such activities ordinarily employed to render the produce fit to be taken to the market. c. The cultivator should not perform any other activity other than the ones mentioned in the clause to sell the produce in the market. 4.6. Assessee submitted that all the three parameters mentioned above have been complied with in the following manner- a) Firstly, the land is situated in Kurnool district of Andhra Pradesh, India. According to Black's Law Dictionary, land is the solid material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted out by the assessee that all the issues raised and case laws relied upon by the ld. Assessing Officer were considered in the decision of the Hon'ble Special Bench of the Tribunal in the case of DCIT vs. Inventaa Industries (P.) Ltd (2018) 172 ITD 1 (Hyd)(SB). All the case laws mentioned in the SCN were considered by the Hon'ble Special Bench while deciding the issue in favour of the assessee. 4.8. Assessee also relied on the decision of Chennai ITAT in DCIT v. British Agro Products (India) Pvt. Ltd. in ITA No.969 970/Chny/2022 wherein after relying on the decision of the Hon'ble Special Bench in Inventaa Industries (supra) held that cultivation and sale of white button mushroom is an agricultural activity and income derived therefrom is exempt from income-tax. 5. After considering the submission made by the assessee, ld. CIT(A) did not find favour with the same and upheld the view taken by the ld. Assessing Officer that growing of white button mushrooms is in the nature of business activity. Aggrieved, assessee is in appeal before the Tribunal. 6. Before us, ld. Counsel for the assessee placed on record a paper book containing 157 pages along with certain other doc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents. (e) The soil so prepared is cultivated by providing manures, pesticides, water and other necessary ingredients. (f) The process of production is the same as in any other agricultural produce/plant. (g) Seeds are obtained from the matured mushroom; they are spawn over the processed soil; watering is done periodically, the growth is observed and harvesting is done. (h) The whole cycle is like growing any other vegetable plant; (i) The Government departments; financial institutions; world organisation; the food organisations treated mushroom as agriculture. 7.2. Thus, in the given set of facts and circumstances, following the issues arose for the consideration of Hon'ble Special Bench, so as to answer the question referred to it : (i) Land is immovable property. Soil is part of land. If soil is placed in trays or pots and when operations are carried out on this soil , which is detached from land, for production of mushroom, could such activity be termed as agricultural activity? (ii) Is mushrooms a fungi or vegetable or plant ? Is the income derived from the production and sale of mushroom, agricultural income if the product is a 'fungi'? (iii) When agricultural prod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a wide import. For the purpose of understanding the nexus between an agricultural operation and an agricultural land, what needs to be inferred from the term land is that, the cultured top layer of the earth, which is fit for any sort of cultivation, is land for this purpose. Hence, in our opinion, the soil which is placed on the vertical space above the land in trays, in one sense of the term, is also land. (ii) On is mushroom a fungi or vegetable or plant ? Is the income derived from the production and sale of mushroom, agricultural income if the product is a 'fungi'? 14.2. On a careful consideration of the material on record, we conclude that mushroom, is not a vegetable plant or an animal but a fungus . 14.3. The contention of the assessee is that, what is produced by performing the basic operations on the soil, is an agricultural product, even though the product is not a plant or the flower or a vegetable or a fruit . It was emphasised that the nature of the product is irrelevant as far as it is produced by performing some basic operations on the soil. 14.4. In the case of CIT v. Raja Benoy Kumar Sahas Ray (supra), as already stated, it is laid down that the product s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ural operation resulting in the income derived therefrom not being agricultural income? The third issue is whether agricultural production done under 15 controlled conditions , results in the product so raised not being a 'product from agricultural activity. 15.1. Each and every agricultural operation involves certain procedures and protocols. Certain conditions are necessary for natural growth of the product. The degree of control and the type of scientific input differs from product to product. The type of soil to be used, the nature of agricultural operations to be undertaken, material required to be used to enrich the soil, the timing of sowing, transplanting, harvesting etc., the quantity and quality of inputs such as water, fertilizer, pesticides etc. to be used and the timing at which they have to be used, are all controls that a farmer exercises in every type of agricultural activity. There can be no agriculture without controlling the conditions of production by human intervention. Just because the degree of control of the conditions are greater in some cases, as compared to others, the product produced out of such process would not cease to be an agricultural product. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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