assessee is carrying on business of manufacture of canned products, fruits and mushrooms, etc. He claimed depreciation at 15 per cent on shed in which mushrooms are grown. ITO allowed depreciation at 7.5 per cent as applicable to third class building negativing assessee's claim that shed as factory building was entitled to depreciation at twice normal rate. Commissioner (Appeals) also confirmed order of ITO. assessee is in appeal. 2. It is claimed that activity of growing mushrooms under controlled conditions has been accepted as manufacturing activity. It followed, therefore, that shed in which mushrooms are grown has to be treated as factory building and depreciation has to be allowed at twice normal rate. learned departmental representative opposed this contention stating that mushroom growing was agricultural activity and further, no articles were manufactured or processed to enable ITO to treat shed as factory. 3. Section 80JJA of Income-tax Act, 1961, has been introduced by Finance Act, 1979 with effect from 1-4-1980. memorandum explaining provisions in Finance Bill, 1979, states as follows: "81. Exemption from income-tax of income from mushroom growing under controlled conditions. Under existing provisions, 'agricultural income' is exempt from income-tax. For this purpose, 'agricultural income' includes, inter alia, any income derived from land situated in India and used for agricultural purposes. Where cultivation of mushrooms is undertaken in rooms or sheds with soil put in wooden beds, income derived therefrom cannot be said to be income derived from land, and, accordingly, will not be exempt from income-tax. With view to encouraging cultivation of mushrooms, it is proposed to insert new section 80JJA in Income-tax Act in order to provide that, in computing total income of assessee deriving profits and gains from business of growing mushrooms under controlled conditions, one-third of such profits and gains or Rs. 10,000, whichever is higher, will be allowed as deduction. 82. This amendment will take effect from 1st April, 1980, and will accordingly apply in relation to assessment year 1980-81 and subsequent years." From above it follows that growing of mushrooms has been treated as business and not as agricultural activity. very fact that ITO has allowed depreciation at 7.5 per cent on shed implies that he has also accepted that assessee is carrying on business activity. In light of these facts, we have to reject argument on behalf of revenue now advanced that mushroom growing is agricultural activity. It remains to be seen whether shed is to be considered as factory building. Evidently, assessee is growing mushrooms and selling them. This is now treated as business activity. He trades in mushrooms which are grown in his shed. Therefore, it is to be presumed that mushrooms are articles produced by assessee in its shed. argument on behalf of revenue that mushrooms grow because of action of sun and air on plant and, thus, no manufacturing is involved, has to be rejected, for this argument closely follows earlier argument that growing of mushrooms is agricultural activity which has not been accepted by us. Further, assessee employs certain equipment to control temperature, etc. It is precisely because of growing of mushrooms under controlled conditions that Government has accepted that mushrooms growing is business activity. thing or article produced by this activity is mushroom. Therefore, there can be no hesitation in accepting contention of assessee that shed in which mushrooms are grown is factory building and as such business activity of producing something as opposed to ordinary trading of existing materials is carried on. Thus, shed building has to be considered as factory building. We, accordingly, allow claim of assessee for depreciation at 15 per cent on shed building. appeal is allowed. *** BLUE MOUNTAIN FOOD PRODUCTS LTD. v. INCOME TAX OFFICER