The functional integrality of components with the whole unit is crucial in determining whether the components could be treated as plant for depreciation allowance.

1. The Income-tax Appellate Tribunal, Bangalore, has referred to us the following two questions for our opinion in terms of section 256(1) of the Income-tax Act, 1961 :

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the applicant was not entitled to depreciation at 100 per cent. on the cages whose individual cost was less than Rs. 750 on the ground that the cages had been fabricated into one unit and thereby lost its individuality ?

(2) Whether, on the facts, the Tribunal was right in holding that each cage was not a plant by itself and accordingly the applicant was not entitled to depreciation at 100 per cent. when the cost of each of the cages was less than Rs. 750 ?"

2. Before we address ourselves to the legal position on the subject, a few facts relevant to the disposal of this reference may first be noticed. The assessee is carrying on the business of running a poultry farm.

3. It has, for that purpose, raised sheds and installed cages in the same for housing birds. During the period relevant to the assessment year 1981-82, the assessee added some new sheds to the existing ones and purchased 9,000 cages at the rate of Rs. 15 per cage for installation in these sheds. In the income-tax return filed by the assessee for the relevant year, it claimed 100 per cent. depreciation on the cost of the cages purchased on the ground that each cage was a separate plant whose value being less than Rs. 750, the same qualified for 100 per cent. depreciation under section 32 of the Income-tax Act. The assessee's claim was disallowed by the Income-tax Officer on the ground that the so-called cages were not separate but one continuous fabricated unit in which partitions are made for a number of birds to be enclosed in each compartment. The Income-tax Officer held that the cages purchased by the assessee did not have a separate existence apart from the bigger unit which consisted of hundreds of such cases and that the cost of each such unit being more than Rs. 750 only ten per cent. depreciation was allowable on the cost of the additions made.

4. The view taken by the Income-tax Officer was affirmed by the Commissioner to Income-tax (Appeals), Bangalore, by his order dated August 30, 1985, holding that the assessee necessarily purchased a number of cages to set up a common unit, with common facilities for lighting, feeding, watering, etc., for the birds housed in the same. The Commissioner was of the opinion that it was more reasonable to treat the whole unit as one single machinery rather than taking each small cage as a separate plant by itself. The assessee then went up in appeal to the Income-tax Appellate Tribunal to question the view taken by the Income-tax Officer and the Commissioner of Income-tax (Appeals). The Tribunal concurred with the said views and dismissed the assessee's appeal to that extent by its order dated February 10, 1989. The Tribunal observed thus :

"It no doubt appears to us that the cost of each cage is less than Rs. 750. But the question is whether each cage can be treated as a unit by itself for the purpose of depreciation. The assessee has not kept each cage separately. Cages are fabricated in such a manner to form a bigger unit. We had also occasion to see the photograph of the fabricated unit which was shown to us at the time of the hearing by the learned representative of the assessee. It was argued by Shri Parthasarathy that cages are fixed in a row for the purpose of feeding water through a mechanised system and that the individuality of each cage is not lost. We are unable to accept this contention. Cages are so fabricated that a number of birds are enclosed in each Department so much so the individualness of each cage is totally lost. There is one bigger unit which alone can be recognised as one separate item of plant or machinery. Therefore, the authorities below were right in holding that 100 per cent. depreciation was not allowable and we con