Mushroom Income from Factory Not Agricultural Income | HC

Case Details: Principal Commissioner of Income-tax-1 vs. British Agro Products (India) (P.) Ltd. - [2025] 175 taxmann.com 618 (Madras)

Judiciary and Counsel Details

• R. Suresh Kumar & C. Saravanan, JJ.
• T. Ravi Kumar, Sr. Standing Counsel for the Appellant.
• S. Saravana Kumaran & M. Velmurugan for the Respondent.

Facts of the Case

The assessee was engaged in the business of cultivating and selling white button mushrooms. It treated the income from the sale of mushrooms as agricultural income and claimed exemption under section 10(1) of the Act. During the assessment proceedings, the Assessing Officer (AO) contended that white button mushroom is not a plant, fruit, or vegetable, but a fungus. Therefore, the income from its sale cannot be considered agricultural income.

The matter reached the Madras High Court.

High Court Held

The High Court held that section 2(1A) defines agricultural income in three parts. The first part includes income from the use of land for agricultural purposes, whether through rent or revenue. The second part comprises income of farm operations performed on the land, such as agriculture, the performance of any process ordinarily employed by a cultivator, or the sale of produce raised. The third part includes income from any building situated on or near the land, which is used for agricultural purposes.

In the instant case, the assessee didn’t derive any income from the use of land but from the sale of mushrooms grown in its factory under controlled conditions. The income derived from the sale of mushrooms grown in a factory under controlled conditions will not come within the purview of the definition of “Agricultural Income”.

It would have been different if mushrooms were grown by a farmer and thereafter processed by the assessee for making it marketable, in which case, the assessee could have claimed the income as ‘Assessable Income’ within the meaning of section 2(1A)(c). Thus, income from the sale of ‘Button Mushrooms’ from a factory under controlled conditions is not exempt from tax liability under section 10(1).

List of Cases Reviewed

• DCIT v. M/s. Inventaa Industries Private Limited, [2018] 65 ITR 625 (Hyd.)
• Dy. CIT v. Inventaa Industries (P.) Ltd. [2018] 95 taxmann.com 162/172 ITD 1 (Hyderabad – Trib.) (Para 59) distinguished.
• Order passed by Tribunal in I.T.A.No.969/Chny/2022 and I.T.A. No. 970/Chny/2022 dated 05.04.2023 reversed.

List of Cases Referred to

• CIT v. Raja Benoy Kumar Sahas Roy [1957] 32 ITR 466 (SC) (para 6)
• Dy. CIT v. Inventaa Industries (P.) Ltd. [2018] 95 taxmann.com 162/172 ITD 1 (Hyderabad – Trib.)(SB) (para 6)
• CIT v. K.E. Sundara Mudaliar [1950] 18 ITR 259 (Madras) (para 6)
• Pandai Pathan v. Ramasami Chetti [1922] ILR 45 (MAD) (para 6)
• Molar Mal v. Kay Iron Works (P) Ltd. (2000) 4 SCC 285 (para 6)
• Chander Mohan v. ITO [2014] 52 taxmann.com 203/67 SOT 28 (Chandigarh – Trib.) (para 13)
• Mayuri Yeast India Private Limited v. State of UP and another (2008) 5 SCC 680 (para 13)
• CIT v. Rashtradoot (HUF) [2019] 262 Taxman 360 (SC) (para 13)
• C. Hanumantha Rao v. CIT [2012] 20 taxmann.com 712/335 ITR 17 (Mad) (para 13)
• State of Kerala v. Karim Pharuvi Tea Estates Ltd. [1966] 60 ITR 275 (para 13)
• National Thermal Power Co. Ltd. v. CIT [1998] 97 Taxman 358/229 ITR 383 (SC) (para 18)
• Smt. Manyam Meenakshamma v. Commissioner of Wealth-tax [1967] 63 ITR 534 (Andhra Pradesh) (para 18)
• BLUE MOUNTAIN FOOD PRODUCTS LTD v. ITO [1985] 14 ITD 254 (Bangalore) (para 18)
• CIT v. Soundarya Nursery [2002] 123 Taxman 372/[2000] 241 ITR 530 (Madras) (para 6)
• Asstt. CIT v. Malhotra Mukesh Satpal [2008] 115 ITD 467 (Pune) (para 18)
• CIT v. Green Gold Tree Farmers (P.) Ltd. [2008] 167 Taxman 151/299 ITR 262 (Uttarakhand) (para 18)
• CIT v. Jagish Ram Krishan Chand [2008] 304 ITR 45 (Himachal Pradesh) (para 18)
• Dy. CIT v. Best Roses Biotech (P.) Ltd. [2012] 17 taxmann.com 56/49 SOT 277 (Ahmedabad – ITAT) (para 18).