9911796707
TMI Blog2025 (3) TMI 220X X X X Extracts X X X X X X X X Extracts X X X X ..... l by the Department is directed against the impugned order dated 07/12/2023, passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, ["learned CIT(A)"], for the assessment year 2020-21. 2. The Department has raised following grounds:- "1. Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in deleting the addition made by the AO ignoring the fact that assessee claimed depreciation against the factory building in which mushroom production was carried out, business expenses carried out for mushroom cultivation then the corresponding income arises cannot be treated as 'Agricultural Income'. 2. Whether on the facts and circumstances of the case and in law, the Hon'ble CIT(A) erred in treating income from production of mushrooms as agricultural income. 3. Any other ground which may be raised at the time of hearing with the permission of Hon'ble ITAT." 3. The assessee is a corporate entity filed its return of income on 31/03/2021 electronically, declaring total income of Rs. 1,91,24,370. During the year under consideration, the assessee-company was engaged in various activities nam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is worthwhile to mentioned that. As per various judicial decisions farming of mushroom is a business, and not the agriculture one. Further, the income from mushroom production/manufacturing is not an agricultural income because of the following facts/reasons in the instant case 1. As the mushroom business is being run from factory buildings with the help of plant and machinery and the assessee is claiming depreciation against building plant and machinery total amounting to Rs. 4,20,23,114/-ie including the assets used in production of mushrooms, inter alia. First of all this is the business income that's why only the prudent assessee claimed composite depreciation amounting to 4,20,23,114/- Secondly, if this is not a business income then the assessee is not eligible for claiming expenses of Rs. 12.9 Crore and depreciation against agricultural income from production of mushroom and the proportionate percentage of depreciation of Rs. 4,20.23.114/- and the expenses claimed against impungned agriculture income are liable to be disallowed and required to be added back to the total income of the assessee. As per section 10(1) of the I.T. Act, 1961, the agriculture income is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s oil. The same is squarely applicable to the case of the assessee. 3. As the assessee company is manufacturing/ producing the mushrooms in a factory building situated at Kh. No 32/5 Mauza lihgaon Area, Jabalpur Ring Road. Tq. Kamptee Dist. Nagpur, the assessee also taking benefit of depreciation on this factory building. Therefore, the income from production of mushrooms cannot be treated as agriculture income. In the light of the decision of Hon'ble ITAT in the case of Chander Mohan Vs ITO ITA No. 389/Chd/2012 assessment year 2003-04, in which the Hon'ble ITAT has disallowed the claim of agriculture income from selling of mushrooms produced in a shed situated in municipal limits, the income from producing and selling of Mushrooms is business income. 4. Mushrooms are grown by the assessee in 'growing rooms' under 'controlled conditions' in racks placed on shelves above land and on Compost (manure) which is prepared with paddy straw, Horse manure, Chicken manure, Gypsum and Urea which is not land by any stretch of magination, Hence the activity is not agricultural activity. 5. Rule 7A 7B and 8 of the Income Tax Rules, 1962 were referred to in support o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also obtained the permission from Maharashtra Pollution control board for the unit in the name of Mis Sonu Monu Agro Pvt. Ltd. Kh. No 32/5, Mauza lingaon Area, Jabalpur Ring Road, Tq. Kamptee Dist. Nagpur as is submitted by the assessee itself. 9. The main characteristic of crops/plants/trees is that they contain chlorophyll, which is used to convert energy from sunlight into carbohydrates. This process of converting energy into carbohydrate is called photosynthesis and during this process the plants releases oxygen (02). Whereas mushrooms do not contain chlorophyll which means they cannot photosynthesize ie. they cannot absorb carbon dioxide (CO2) from environment and cannot produce oxygen. Mushrooms obtain their food by metabolizing dead or decaying organic matter, such as dead plants on the ground. This process is totally commercialized activity, not naturally grown crops for agriculture. 10. Classification by or views of various Government and public sector agencies on whether growing of mushroom is an agricultural activity or not is of no significance and does not help the assessee in claiming exemption u/s. 10(1) of the Act unless it is proved by the assessee. 11. The B ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing Officer, the assessee carried the matter before the first appellate authority. 4. Before the learned CIT(A), the submissions made by the assessee are reproduced below:- "5.4 On the above facts and findings, the appellant during the appellate proceedings has submitted its contention, the relevant part of which is reproduced hereunder: "The order passed is without proper consideration of facts relating to the case and is bad in law. The assessee, during the course of the assessment proceedings, had furnished various details relating to the conduct of operations by the in relation to the activity of Mushroom Farming. Various documentary evidence including actual photographs showing the activities relating to Mushroom Farming being carried out were furnished but the learned AO has simply overlooked these evidences. The learned AO acted in pre-conceived suspicions and based his decision on surmises and conjectures without any basis or footing. The submissions made, including the one in response to the Show Cause Notice, were simply overlooked or not considered without any justification or reason for doing so. Such improper/non-consideration resulted in summary dismissal o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Limited [(2018) 065 ITR (Trib) 0625] had analyzed the matter exhaustive and covered almost all the aspects related to the activity of Mushroom Farming. The attention of the learned AO was specifically drawn towards this judgement and also the fact that the ratio of the same is squarely applicable in assessee's case. However, the learned AO has simply overlooked the said judgment without giving any reason or justification for non-consideration except the cryptic note "the same is not acceptable". The assessee had during the course of the assessment proceedings furnished the documents originating from/belonging to various Government Departments and Agencies that categorically state and define Mushroom as an Agricultural Product/Vegetable thereby clearly meaning that Mushroom Farming as an Agricultural Activity. The documents that were furnished were sourced from the following Government of India Undertakings/Body/Authority: a) The Agricultural and Processed Food Products Export Development Authority (APEDA) b) The Indian Council of Agricultural Research (ICAR) - the apex body for coordinating, guiding, and managing research and education in agriculture in the entire count ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employment, ameliorating poverty and ensuring nutritional security" (Available online on Link: https://dmrsolan.icar.gov.in/DMRAnnual Report 2015_16.pdf ) Thus, it is crystal clear that the activity of Mushroom Farming is nothing but part of the Agricultural Activities. Mushrooms are grown on soil with the expenditure of human labour and skill and thereafter technology is used to aid the natural growth of this agricultural produce. Thus, there is nothing that may lead anyone to the conclusion that Mushroom is not an agricultural product. In view of the above, the activity of Mushroom Farming cannot be anything else but an Agricultural Activity. Thus, the learned AO has simply overlooked the unambiguous definition/categorization by Government Bodies and has not assigned any justification while doing so. Further, the learned AO has heavily relied on his misjudged belief/opinion that the assessee has claimed deduction for Agricultural Expenses from Business Income and the same is in contravention of provisions u/s 14A. It would be apt to clarify that the assessee had maintained separate set of books for the business activities and for Mushroom Farming activity. All the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observations which are as under:- "5.5 I have carefully gone through the facts of the case, assessment order and submission of the appellant. The AO has not disputed the cultivation of mushroom but has made the addition on the premise that income from cultivation of mushroom is business income and not agriculture income as claimed by the appellant. The AO has relied on the order of the Chandigarh Tribunal in the case Chander Mohan Vs ITO in support of his findings. In contrast, the appellant has relied on the decision of Special bench of ITAT Hyderabad in DCIT Vs M/s Inventaa Industries Private Limited (supra) in support of its claim. The appellant has referred to the decisions of various other tribunals also as reproduced above. 5.6 I have perused the judicial pronouncements on the said issue. The decision of the coordinate bench of the Hyderabad Tribunal is subsequent to and takes into consideration the findings of the Chandigarh Tribunal. After due consideration of facts, the Hyderabad Tribunal by its order dated 9th July 2018 concluded that Mushroom is an agricultural product raised from land. The Hon'ble Tribunal has held that: "....Mushroom, like vegetables and othe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is, whether or not the cultivation of mushroom falls within the purview of agriculture. As stated by the learned Counsel for the assessee, this issue is now settled by the Special Bench of the Tribunal, ITAT, Hyderabad Bench, cited supra, a copy of which is placed on record, wherein the Special Bench, has held that "Hence as basic operations are performed by expenditure of human skill and labour on land by the assessee, which results in the raising of the "product" called "Edible white button mushroom" on the land and as this product has utility for consumption, trade and commerce, the income arising from the sale of this product is agricultural income and hence exempt u/s 10(1) of the Act". The findings recorded by the Special Bench in the said case are recorded vide Para-8 to 16.7/Page-16 to 55, a copy of which is placed on record. Since the issue for our adjudication in this Departmental appeal is squarely covered by the aforesaid Special Bench decision, consistent with the view taken therein, we decline to interfere with the order passed by the first appellate authority and dismiss the grounds raised by the Revenue. 9. In the result, Department's appeal stands dismissed. Ord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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