Mushroom cultivation qualifies as agricultural income where soil-based operations and marketable crop production remain central.

Income from cultivation and sale of white button mushrooms was treated as agricultural income exempt under section 10(1) because the activity involved both basic operations on soil and subsequent operations necessary to raise a marketable product. Cultivation in trays and a temperature-controlled facility did not change the character of the activity, and the use of plant, machinery, packaging, branding, or bank finance was not enough to convert it into a non-agricultural business. The Revenue's appeals therefore failed.

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Issues: Whether income from cultivation and sale of white button mushrooms is agricultural income exempt under section 10(1) of the Income-tax Act, 1961, or business income.

Analysis: The cultivation process involved preparation of soil, spawning, and subsequent operations such as watering, weeding, disease control, harvesting, and cold storage before sale. The term "agriculture" was held to cover basic operations on land or soil and the subsequent operations necessary to raise a marketable product. The fact that cultivation was carried on in trays and a temperature-controlled facility did not alter the character of the activity. The use of plant and machinery, packaging, branding, and bank finance also did not convert the activity into a non-agricultural business. The reasoning was supported by the broad understanding of agricultural operations and by prior authorities treating mushroom cultivation as agricultural activity.

Conclusion: The income from cultivation and sale of white button mushrooms is agricultural income and is exempt under section 10(1) of the Income-tax Act, 1961. The Revenue's appeals were liable to fail.

Ratio Decidendi: Where a marketable product is raised from soil by performing basic and subsequent agricultural operations, the income retains its agricultural character even if cultivation is carried on in trays or under controlled conditions.

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