TaxTMI 
TaxTMI 
2025 (3) TMI 220
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....ances 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 namely Dall Mill, Cold Storage / Warehousing and Mushroom cultivation activity and produced Button Mushrooms meant for human consumption i.e., edible mushrooms. The case was selected for complete scrutiny under CASS and statutory notice u/s 143(2) of the Income Tax Act, 1961 ("the Act"). The Assessing Officer observed that the assessee company has shown composite turnover from Daal Processing business, Cold storage unit and Manufacturing of Mushrooms amounting to Rs. 51,07.01,078. The assessee also claimed composite expenses and composite depreciation against manufacturing of Daal Cold storage service and manufacturing / producing of mushrooms. The Assessing Officer discussed this issue in its assessment order vi....
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.... 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 the income which do not form part of total income and as per section 14A(1) of the I.T. Act, 1961 for the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income. The Prudent assessee might have suo-moto disallowed the expenses amounting to Rs. 12.90 Crore and percentage of depreciation of Rs. 4,20,23,114/-, on proportionate basis, if it was an agriculture income, but the same are claimed on aggregate basis because this is the business income as the assessee knew very well. Long ago the Hon'ble Supreme Court has int....
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.... 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 of the contention that unless income is derived from performing basic operations on the land, the same could not be construed as 'agriculture income. But in the case of assessee it is clear that no basic operations on the land are being performed. 6. In its reply, the assessee relied upon the decision of Hon'ble ITAT special Bench Hyderabad in the case of Dy. Commissioner Vs M/s INVENTAA Industries Pvt Ltd vide ITA No. 1015 to 1018/ Hyd/2015, but the same is not accetable. It is important to note that no operations are, carried out on land in the case of the assessee. In the detailed submissions made by the assessee, which ra....
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....ey 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 Bangalore Bench of ITAT in the case of Blue Mountain Food Products Ltd.. [14 ITD 254] held that "the activity of growing mushrooms under controlled conditions has been accepted as a manufacturing activity. It followed, therefore, that the shed in which mushrooms are grown has to be treated as a factory building and depreciation has to be allowed a twice the normal rate". 12. For manufacturing/producing of mushrooms, one building is essentially needed in which the mushrooms are manufactured in racks under certain degree controlled temperature and in the absence of sunlight. This crop cannot be....
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.... 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 of them which is totally unjustified and untenable as per the settled position of law. Thus, the order has been passed without proper consideration of facts, without considering the facts of the case and by simply overlooking the evidence etc. furnished by the assessee. This renders the order unjustifiable and untenable. The submission filed by the assessee has not been properly considered. Even the subsequent judicial pronouncements cited by the assessee, wherein facts were similar to the facts in assessee's case....
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....c 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 country under the aegis of Department of Agricultural Research and Educate (DARE), Ministry of Agriculture and Farmers Welfare. c) The National Horticulture Board - Ministry of Agriculture & Farmer Welfare. d) The Indian Council of Agricultural Research (ICAR) - Directorate of Mushroom Research - an autonomous organization under the Department of Agricultural Research and Education (DARE), Ministry of Agriculture and Farmers Welfare....
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.... 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 Receipts, Payments and transactions for Business Activities and for Mushroom Farming have been maintained regularly. Only for the purpose of preparation of Financial Statements, the records of both the activities were compiled and presented as a single Financial Statement. The assessee had also furnished the su....
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.... 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 other crops or plants, are grown on soil/land and are always attached to the soil until harvested. They draw their nourishment from the soil only. The product mushroom does not arise fr....