TaxTMI 
TaxTMI 
2024 (11) TMI 564
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....he 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. 22,27,04,010/- from cultivation of mushrooms and claimed the same as exempt u/s 10(1) of the Act as disclosed in Schedule EI of the return form. Case was selected for scrutiny under CASS to examine the issues of "high liabilities as compared to low income/receipts and large agricultural income". Details were called for which assessee furnished proof of land ownership, financial statements along with notes, computation of income, and other details before the ld. Assessing Officer. On verification of the said details, ld. Assessing Officer observed that mush....
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.... 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' includes soil or any material coming out of the earth. Assessee is using soil as its base for cultivation of mushroom and for that purpose, it is using the agricultural lands situated at Kurnool District, Andhra Pradesh. Therefore, the meaning of the "land" includes a part of the material of the earth, which includes soil. The mushrooms are grown naturally on the soil and in controlled conditions which facilitate its growth by providing the nutrients to the soil; fertilizers, water etc. The soil is cultured and the con....
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....l 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 of the earth, whatever may be the ingredients which it is composed of whether soil, rock or other substance." "Land" included not only the soil but everything attached to it, whether attached by the course of nature, as trees, herbage, and water, or by the hand of man, as buildings and fences. Further, according to Random House Dictionary, The Unabridged edition, the word "soil" includes "any place or condition providing the opportunity for growth or development." Soil is the materia....
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.... 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 documents in support of the claim made in this appeal. At the outset, ld. Counsel pointed out that assessee had appropriately made a disclosure in its return of income in Schedule - EI - Details of Exempt Income by reporting gross agricultural receipts at Rs. 22,27,04,010/-. In this respect, it was submitted that inadvertently expenditure incurred on agriculture could not be keyed in which resulted in gross agricultural receipts reported as net agricultura....
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....le 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 production is done in "controlled conditions", does it cease to be agricultural operation resulting in the income derived therefrom not being agricultural income ? 7.3. On all the above three issues, the Hon'ble Special Bench gave its observations and findings, relevant portion of which is reproduced as under: (i) On "Land" is immovable property. Soil is part of land. If "soil" is placed in trays or pot....
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....e 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" should be "raised on the land" by "performing some operation on land by expenditure of human skill and labour" and that the "product" should be "of some utility for consumption, for trade and commerce". 14.5. The term "product" is defined as: (a) an article of substance i.e. manufactured or refined for sale. (b) A thing or person that is the result ....
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....lves 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. The degree of control is irrelevant in arriving at a conclusion on this issue. With the advancement of technology, every aspect of production is monitored and controlled, so as to obtain optimum use of the produce. This is true with the use of greenhouse technologies. 15.2. The Income-tax Appellate Tribunal....