The Chennai bench of Income Tax Appellate Tribunal (ITAT) has recently held that income generated from production and sale of white button mushrooms is agriculture activity hence shall be exempt from tax.
Assessee British Agro Products (India) Pvt. Ltd. filed its return of income for the assessment year 2017-18 declaring a total income of Rs. 6,76,24,270/-. After revising the return, the assessee has declared agricultural income and claimed the said income as exempt from tax.
The case was selected for scrutiny and during the course of assessment proceedings, AO denied the claim of assessee treated income derived from production and sale of white button mushrooms as income from business assessable under the head Profit and Gains of Business and Profession (PGBP). Aggrieved assessee filed appeal before CIT(A).
The CIT(A), after considering relevant submissions of the assessee held that income generated from production and sale of white button mushrooms is agricultural activity and income is exempt from tax. Against the order, the revenue filed an appeal before the tribunal.
M. Rajan, counsel for the revenue submitted that growing white button mushrooms could not be treated as agricultural activity because the assessee is growing white button mushrooms in a temperature controlled facility by employing various plant and machinery and also availed huge loans from banks and financial institutions under the category industry. Thus, said activity can only be considered as industrial, but not agricultural activity.
Y. Sridhar, counsel for the assessee, relied upon the decision of DCIT vs M/s. Inventaa Industries Pvt Ltd submitted that growing white button mushrooms is an agricultural activity and income derived from said activity is agricultural income which is exempt from tax.
The assessee has filed RTI reply received from National Horticultural Board, where it had been clarified that cultivation of white button mushroom comes under agricultural activity.
The Ministry of Commerce and Industry, Government of India has also classified mushrooms as a vegetable for human consumption.
Similarly, the Central Board of Indirect Taxes and Customs (CBIC), Ministry of Finance has also classified mushroom as a vegetable under GST laws.
While observing the contentions of the both parties, the tribunal observed that operations which are undertaken for the production of mushrooms are nothing but agricultural operations.
Hence, the two member bench of the Tribunal with Aby T. Varkery, (Judicial Member) and Manjunatha. G, (Accountant Member) allowed the appeal of the assessee and held that “cultivation and sale of white button mushroom is an agricultural activity and income derived from said activity comes under the head agricultural income, which is exempt from tax”.
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