Challenge on nature of income from Growing Mushrooms in trays by utilizing the artificial climate: Supreme Court Allows SLP of British Agro Product [Read Order]
The High Court of Judicature at Madras overturned the Income Tax Appellate Tribunal's (ITAT) ruling in favor of British Agro Products
Challenge on nature of income, British Agro Product, Mushrooms
Challenge on nature of income, British Agro Product, Mushrooms
The Supreme Court allowed the Special Leave Petition (SLP) filed by British Agro Products challenging the nature of income from growing mushrooms in trays by utilising artificial climatic conditions.
The SLP arose out of the impugned final judgment and order dated 09-05-2025 in TCA No. 500/2023 passed by the High Court of Judicature at Madras, which had ruled against the petitioner.
A two-judge bench of Justice Manoj Misra and Justice Ujjal Bhuyan issued notice, returnable in four weeks, and permitted the petitioner to serve the Central Agency representing the Revenue in the Court. The bench further directed that, in the meantime, no recovery shall be made from the petitioner pursuant to the impugned order.
The Madras High Court had earlier overturned the Income Tax Appellate Tribunal’s (ITAT) ruling in favour of British Agro Products by holding that revenue from the production and sale of white button mushrooms in a factory under controlled conditions is not agricultural income and therefore not exempt from income tax.
The key issue was whether the revenue from cultivating white button mushrooms in a regulated manufacturing environment constituted "agricultural income" under Section 2(1A) of the Income Tax Act, 1961. The High Court ruled that mushrooms are fungi, not plants, fruits, or vegetables, and that cultivation in a factory environment under artificial conditions does not meet the definition of agricultural income.
This verdict effectively overturned the earlier ITAT ruling, which had determined the income to be agricultural income. Companies cultivating mushrooms in comparable controlled, factory-like circumstances are now likely to face income tax liability on such earnings.
The ruling reinforces the Madras High Court’s narrower interpretation of "agricultural income," focusing on both the nature of the product and the conditions of cultivation.
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