It is evident from the above-quoted language that compliance with the "section 38 property" definition necessitates (1) depreciable property, (2) having an estimated useful life of 4 years or more, and (3) which is either tangible personal1972 U.S. Tax Ct. LEXIS 116">*128 property or other tangible property, excluding buildings and their structural components, used as an integral part of manufacture, production, or extraction or is a research or storage facility. ⁸ The facts noted above clearly indicate that all property in issue is both depreciable and has an estimated useful life of 4 years or more. We therefore need only concern ourselves with the third requirement.

Turning to the first item in issue, the sweet rooms, petitioner asserts that such property should be classified as other tangible property used either as an integral part of manufacture, production, or extraction or as a storage facility. Respondent, on the other hand, contends that these processing chambers are buildings and therefore cannot qualify as "section 38 property." 1972 U.S. Tax Ct. LEXIS 116">*129 ⁹

Before considering petitioner's assertions we must first ascertain whether the processing chambers are in fact buildings. In this regard respondent, in an attempt to define the term "building," has promulgated section 1.48-1(e)(1), Income Tax Regs., which states in part:

(e) Definition of building and structural components. (1) Buildings and structural components thereof do not qualify as section 38 property. The term "building" generally means any structure or edifice enclosing a space within its walls, and usually covered by a roof, * * * The term includes, for example, structures such as apartment houses, factory and office buildings, warehouses, barns, garages, railway or bus stations, and stores. * * * Such term does not include (i) a structure which is essentially an item of machinery or equipment, or (ii) 1972 U.S. Tax Ct. LEXIS 116">*130 an enclosure which is so closely combined with the machinery or equipment which it supports, houses, or serves that it must be replaced, retired, or abandoned contemporaneously with such machinery or equipment, and which is depreciated over the life of such machinery or equipment. Thus, the term "building" does not include such structures as oil and gas storage tanks, grain storage bins, silos, fractionating towers, blast furnaces, coke ovens, brick kilns, and coal tipples.

More recently in Rev. Rul. 66-89, 1966-1 C.B. 8, respondent has again attempted to interpret this most general of terms. It states therein:

(5) Storage facilities. If property (other than a building and its structural components) is a storage facility used in farming such as the cultivation of the 58 T.C. 365">*371 soil or the raising of livestock, and if it cannot be reasonably adapted to other uses, it qualifies as "other tangible property" within the meaning of section 48(a)(1) of the Code, regardless of whether it is a temporary or a permanent facility. Typical storage facilities on farms include grain storage bins, corn cribs and silos. These are all to be distinguished1972 U.S. Tax Ct. LEXIS 116">*131 from farm buildings which do not qualify as section 38 property, such as barns, stables, poultry houses and warehouses. All of these contain space within which the farmer works and carries on his farming activities and are ineligible for the credit because they fall within the definition of the term "building." A storage facility, as above illustrated, provides the farmer only storage space but not working space.

It is apparent from both of the above-quoted provisions that at least as to the status of a building versus a storage facility a function or use test is considered by the respondent to be the determining factor. That is, the facility may not be reasonably adaptable to other uses and it must provide only storage space, not working space.

Respondent in applying this test to the instant case would have us look to petitioner's plant as a single unit. He asserts that since the major portion of the plant area was utilized as work and office space the entire structure must be excluded from investment credit treatment. In other words it is respondent's position that portions or areas of a structure cannot qualify separately. We cannot agree. It is manifest from both the statute1972 U.S. Tax Ct. LEXIS 116">*132 and respondent's own regulations and revenue rulings that a storage facility can qualify for the investment credit. This being the case we can find little distinction between a self-contained storage facility and one situated within a larger plant. We find support for this position in Robert E. Catron, 50 T.C. 306">50 T.C. 306 (1968), wherein this Court stated:

Respondent's position is that no structure may qualify as a storage facility if it provides working space. * * * On brief, respondent is apparently somewhat reluctant to argue directly and forcefully the substantive question of whether the refrigerated room, considered alone, qualifies as a storage facility. He argues that working space is provided within the facility as a whole, and there can be no allocation of costs within the facility so that the cold-storage room qualifies while the nonrefrigerated two-thirds does not. In short, he urges that portions or areas of a structure may not qualify separately.

We regard this position as primarily procedural or administrative, and not substantive with respect to the definition of "storage facility" as contrasted with that of "building." * * * We conclude1972 U.S. Tax Ct. LEXIS 116">*133 that an allocation is permissible if the refrigerated portion of a structure qualifies substantively as a storage facility. [Emphasis supplied. 50 T.C. 306">50 T.C. 313.]

Applying the above-noted function-or-use test to the sweet rooms we conclude that such property qualifies as a storage facility. In support of this conclusion we note that the sweet rooms were specialized structures used only to subject stored fruit to various controlled atmospheric conditions. They had no other function. The unusual dimensions of the rooms and the varied extremes of temperature, humidity, and air content 58 T.C. 365">*372 undoubtedly limited the rooms' reasonable adaptability. See 50 T.C. 306">Robert E. Catron, supra.

Respondent contends however that these chambers were not storage rooms but processing chambers and therefore cannot qualify as storage facilities. In other words, respondent's argument is to the effect that a storage facility is only a storage facility provided that whatever is being stored is done so in a passive sense, i.e., nothing else occurs during the storage period. We cannot agree. In Northville Dock Corp., 52 T.C. 68">52 T.C. 68 (1969),1972 U.S. Tax Ct. LEXIS 116">*134 affirmed per curiam 427 F.2d 164 (C.A. 2, 1970), various grades of oil were placed in oil storage tanks. Respondent apparently conceded the existence of storage facilities, contesting only its connection with the manufacture or production of petitioner's product. The Court in holding for petitioner noted that while stored therein the oil was mixed, circulated, subjected to controlled temperature, and agitated.

The same result was reached in Sherley-Anderson-Rhea Elevator, Inc. v. United States, 315 F. Supp. 1055">315 F. Supp. 1055 (N.D. Tex. 1970), wherein grain while stored was aerated, turned, dried, blended, sprayed, and subjected to controlled temperature to prevent spoilage and govern the overall quality of the product prior to further processing or sale. See also Schuyler Grain Co., 50 T.C. 265">50 T.C. 265 (1968), affd. 411 F.2d 649 (C.A. 7, 1969); 50 T.C. 306">Robert E. Catron, supra;F. P. Wood & Son of Elizabeth City, Inc. v. United States, 314 F. Supp. 1205">314 F. Supp. 1205 (E.D. N.C. 1970).

We see little difference between the above-cited cases and1972 U.S. Tax Ct. LEXIS 116">*135 the present set of facts.

However, even if we were to agree with respondent, such a decision would not cause the disallowance of the investment credit since it is our further conclusion that the property in issue also qualifies as "other tangible property * * * used as an integral part of manufacturing, production * * *." As section 1.48-1(d)(2) and (4) of the Income Tax Regulations states:

For purposes of the credit allowed by section 38, the terms "manufacturing", "production", and "extraction" include the * * * processing, manipulating, refining, or changing the form of an article * * * Thus, section 38 property would include, for example, property used as an integral part of * * * the processing of meat, fish, or other foodstuffs; * * *

* * * *

(4) * * * Property is used as an integral part of one of the specified activities if it is used directly in the activity and is essential to the completeness of the activity. * * * all properties used * * * in processing raw materials into the taxpayer's final product, would be considered as property used as an integral part of manufacturing.

Clearly, petitioner's sweet rooms conform precisely to the above-quoted regulations; their1972 U.S. Tax Ct. LEXIS 116">*136 controlled conditions were absolutely necessary in 58 T.C. 365">*373 governing shrinkage, ripening, color, and the overall quality of the fruit. See 52 T.C. 68">Northville Dock Corp., supra, wherein the Court stated:

As shown in the findings of fact, tank number 413 was both used in connection with and was also an integral part of blending two different products, No. 2 oil and No. 6 oil, in order to obtain No. 4 oil, a product whose characteristics and uses are different from the other two. We find this activity sufficient to constitute the making of property by "changing the form of an article, or by combining or assembling two or more articles." [52 T.C. 68">52 T.C. 73.]

See also 50 T.C. 265">Schuyler Grain Co., supra at 269, fn. 6.

Upon an examination of the entire record we conclude that petitioner's sweet rooms are "section 38 property" thereby qualifying for the investment credit.

The remaining items in issue are petitoner's blowers, coolers, and electrical equipment.

Respondent relying on section 1.48-1(e)(2), Income Tax Regs., which states in part:

Sec. 1.48-1(e)(2). The term "structural components" includes * * * all components1972 U.S. Tax Ct. LEXIS 116">*137 (whether in, on, or adjacent to the building) of a central air conditioning or heating system, including motors, compressors, pipes and ducts; * * * electric wiring and lighting fixtures; * * * and other components relating to the operation or maintenance of a building.

asserts that such property is a structural component of the plant and must therefore be excluded from the "section 38 property" definition. Petitioner contends however that such property is necessary to its operation and is an integral part of its manufacture and production and should therefore be considered tangible personal property other than a structural component.

Referring specifically to the blowers and coolers we must again agree with petitioner. Section 1.48-1(e)(2), Income Tax Regs., in addition to the above-quoted language, states:

However, the term "structural components" does not include machinery the sole justification for the installation of which is the fact that such machinery is required to meet temperature or humidity requirements which are essential for the operation of other machinery or the processing of materials or foodstuffs. Machinery may meet the "sole justification" test provided 1972 U.S. Tax Ct. LEXIS 116">*138 by the preceding sentence even though it incidentally provides for the comfort of employees, or serves, to an insubstantial degree, areas where such temperature or humidity requirements are not essential. For example, an air conditioning and humidification system installed in a textile plant in order to maintain the temperature or humidity within a narrow optimum range which is critical in processing particular types of yarn or cloth is not included within the term "structural components."

The present facts indicate that such property was used to cool the fruit during packaging and prior to shipment. The reduced temperature was necessary to preserve the quality of the fruit. Though it may also have benefited the employees, the motivating factor behind the 58 T.C. 365">*374 installation of the property was to maintain and preserve a high-quality product. Clearly therefore, the blowers and coolers comply precisely with the above-quoted regulations.

In regard to the status of the electrical equipment respondent has further stated his view in Rev. Rul. 66-299, 1966-2 C.B. 16, which reads in part:

The mechanical service systems described above (plumbing, 1972 U.S. Tax Ct. LEXIS 116">*139 electrical and sprinkler system) are "structural components" since they relate generally to the operation of the building as an overall processing operation system. However, special electrical or plumbing connections which are necessary to and are used directly with a specific item of machinery or equipment, or between specific items of individual, machinery or equipment, are not structural components of the building, but are essentially items of machinery or equipment, and qualify as section 38 property for investment credit purposes. [Emphasis supplied.]

Such language creates a clear distinction between property used in the general overall operation of a building, wherein the credit is disallowed, see Fort Walton Square, Inc., 54 T.C. 653">54 T.C. 653 (1970); Ponderosa Mouldings, Inc., 53 T.C. 92">53 T.C. 92 (1969), and that property which is utilized to aid in the employment of a particular function or particular piece of property. We find this particular dichotomy to be both reasonable and sound and in agreement with congressional intent. See H. Rept. No. 1447, 87th Cong., 2d Sess. (1962), 1962-3 C.B. 516.1972 U.S. Tax Ct. LEXIS 116">*140 In this regard we determine that items 1, 2, and 10 as noted in the facts, are electrical equipment used in the general operation of the plant and therefore do not qualify for the investment credit. The remainder of the items, however, serve either specialized functions or specific equipment and thereby qualify as "section 38 property."

Decision will be entered under Rule 50.