MACLEAN,
J.—These
appeals
from
the
decision
of
the
Minister
of
National
Revenue
affirming
assessments
for
income
tax
levied
against
the
appellants,
for
the
year
1934,
were
heard
together,
but
evidence
was
heard
in
the
case
of
the
appellant
Snyder
only.
Paragraphs
3,
4,
5
and
7
of
the
statement
of
claim
were
abandoned
at
the
trial.
On
June
1,
1933,
the
appellants
Snyder
and
Applegate,
and
one
Wilkinson
(hereafter
referred
to
as
"‘the
appellants’’),
entered
into
an
agreement
with
Sterling
Pacific
Oil
Company
Ld.
(hereinafter
to
be
called
"
‘
Pacific
Oil
Company’’)
whereby
the
former
were
granted
a
licence,
which
I
shall
refer
to
as
a
"‘lease,’’
to
drill
one
oil
well
on
certain
lands
in
the
Province
of
Alberta,
to
operate
the
same,
and
to
dispose
of
any
petroleum
products
and
gas
if
recovered
therefrom
in
commercial
quantities,
upon
the
covenants,
conditions
and
stipulations,
in
said
agreement
set
forth.
I
might
here
add
that
one
Elves
later
became
associated
with
the
appellants
in
the
undertaking.
The
Pacific
Oil
Company
leased
the
said
lands
from
The
Calgary
&
Edmonton
Corporation
Ld.,
here
called
‘‘the
Head
Lessor,’’
the
latter
corporation
being
the
successor
in
title,
by
lease,
to
The
Calgary
&
Edmonton
Land
Company
Ld.,
and
which
lease
is
hereinafter
referred
to
as
‘‘the
Head
Lease.’’
It
was
a
term
of
the
lease
from
Pacific
Oil
Company
to
the
appellants
that
the
latter
should
pay
to
the
former
‘‘a
royalty
in
cash”
of
one-eighth
of
the
current
market
value
at
the
time
and
place
of
production
of
all
the
oil
and
gas
produced
and
saved
from
the
leasehold,
this
being
the
royalty
payable
by
Pacific
Oil
Company
to
the
Head
Lessor,
and
similarly
a
royalty
in
cash
of
one-tenth
of
all
the
oil
and
gas
produced
and
saved,
-to
Pacific
Oil
Company.
The
first
mentioned
royalty
was
to
be
paid
to
the
designated
agents
of
the
Head
Lessor,
and
the
second
mentioned
royalty
to
Pacific
Oil
Company.
In
several
agreements
put
in
evidence,
the
terms
‘‘royalties’’
and
‘‘units
of
production’’
seem
to
be
employed
synonymously
as
denoting
a
share
in
the
production
of
the
oil
well
to
be
drilled,
each
unit
being
one
per
cent
of
production.
I
do
not
think
it
is
correct
here
to
use
interchangeably
the
words
"
1
royalties
‘
‘
and
‘‘units
of
production.’’
In
the
lease
from
Pacific
Oil
Company
to
the
appellants
the
latter
obligated
themselves
to
pay
to
the
former,
and
the
Head
Lessor,
a
‘'royalty
in
cash”
representing
certain
proportions
of
the
market
value
of
‘‘all’’
the
oil
or
gas
produced
or
saved
from
the
leased
area,
and
that
means
the
gross
amount
of
oil
or
gas
produced
or
saved.
There,
the
term
“royalty”
is,
I
think,
appropriately
used
and
it
means
that
fixed
proportions
of
the
value
of
the
gross
production
were
to
go
to
Pacific
Oil
Company,
and
the
Head
Lessor,
and
they
are
the
equivalent
of
rents
for
the
leased
area.
In
another
agreement,
to
which
I
shall
presently
refer
in
some
detail,
between
the
appellants
and
Sterling
Royalties
Ld.,
reference
is
made
to
the
sale
of
‘‘royalties
or
units
of
production.’’
In
practice,
I
should
think
that
when
one
speaks
of
the
sale
of
‘‘units
of
production”
it
means
the
sale
of
a
right
to
participate
in
the
production
of
an
oil
well,
after
the
distribution
of
any
royalties
payable
out
of
gross
production;
and,
I
assume,
after
payment
of
all
costs
of
production;
in
reality
it
means
the
right
of
unitholders
to
participate
in
the
net
production
of
an
operating
company,
in
the
proportion
in
which
they
each
hold
units
of
production
in
the
operating
company,
or
otherwise
as
determined.
In
such
cases
the
obligation
of
the
operating
company
might
be
fulfilled
by
delivery
over
of
oil
itself,
in
barrels
or
in
the
unit
of
measure
in
which
it
is
quoted,
sold
and
delivered,
in
the
market.
Now
that,
I
think,
is
something
different
from
a
“royalty.”
In
practice,
I
assume
the
production
is
sold
at
the
current
market
price,
and
what
is
paid
over
or
divided
is
the
proceeds
of
such
sales.
I
think
there
is
a
distinction
between
a
“royalty”
and
a
‘‘unit
of
production,’’
in
this
case
at
least,
and
while
possibly
this
distinction
is
not
of
very
great
consequence
yet
it
will
perhaps
assist
in
a
correct
understanding
of
the
exact
state
of
facts
here.
The
lease
from
Pacific
Oil
Company
to
the
appellants
was,
on
June
1,
1933,
with
the
consent
of
Pacifie
Oil
Company,
assigned
by
the
appellants
to
Sterling
Royalties
Ld.,
which
company
agreed
to
assume
and
carry
out
all
the
covenants
and
obligations
of
the
appellants
under
their
agreement
with
Pacific
Oil
Company,
and
in
consideration
of
such
assignment
the
appellants
were
to
receive
3,450
fully
paid
shares
in
the
capital
stock
of
Sterling
Royalties
Ld.
to
be
divided
among
Wilkinson,
Snyder,
Applegate
and
Elves,
in
the
proportions
mentioned
in
the
written
instrument
assigning
the
lease.
This
agreement
provided
:
It
is
understood
that
the
Party
of
the
Second
Part
(Sterling
Royalties
Ld.)
will
proceed
forthwith
to
sell
sufficient
royalties
or
units
of
production
for
such
an
amount
and
in
such
manner
and
on
such
terms
and
conditions
as
will
secure
the
drilling
of
a
well
on
the
property
hereinbefore
mentioned,
according
to
the
terms
of
the
said
agreement..
It
being
agreed
between
the
parties
hereto
and
the
Parties
of
the
First
Part
as
between
themselves
hereby
agreeing,
that
after
the
sale
of
sufficient
royalties
or
units
of
production
as
aforesaid,
the
royalties
or
percentages
of
production
remaining
shall
be
divided
among
the
Parties
of
the
First
Part
and
Fred.
Elves
in
the
proportion
to
the
shares
held
by
each
in
the
Company
as
hereinbefore
set
out;
said
royalties
to
be
considered
as
part
of
the
consideration
for
the
sale,
transfer
and
assignment
of
the
said
contract
as
hereinbefore
set
out.
The
Company
holding
the
lease,
drilling
the
well
and
operating
the
same
for
such
consideration
as
may
be
agreed
upon
between
the
Company
and
a
Trustee
for
the
unit
holders.
It
is
further
understood
and
agreed
that
the
remaining
royalties
above
mentioned
and
hereby
agreed
to
be
transferred
to
the
Parties
of
the
First
Part
and
Fred.
Elves,
or
the
proceeds
therefrom
shall
bear
certain
costs
and
charges
mutually
agreed
upon
between
the
Parties
of
the
First
Part
and
Fred.
Elves,
including
the
sum
of
Fifteen
thousand
($15,000)
Dollars,
part
of
the
price
of
drilling
the
well
which
it
is
proposed
to
pay
to
Hilary
H.
Head,
drilling
contractor,
from
production
in
an
agreement
now
being
negotiated
with
him.
From
the
last
recited
paragraph
of
the
agreement,
it
will
be
seen
that
after
selling
such
units
of
production
as
would
secure
the
drilling
of
the
well—and
after
payment
of
the
“royalties”
of
course—the
remaining
units
of
production
were
to
be
transferred
to
the
appellants,
and
that
the
remaining
units
of
production
so
transferred,
or
the
proceeds
therefrom,
should
bear
certain
“costs
and
charges,’’
including
that
part
of
the
cost
of
drilling
the
well
which
was
to
be
paid
from
production.
At
the
date
of
this
agreement
negotiations
were
under
way
with
one
Hilary
H.
Head
to
drill
the
well,
and,
as
will
shortly
appear,
a
portion
of
the
cost
of
drilling
the
well
was
to
be
paid
from
production.
An
agreement
between
Head
and
Sterling
Royalties
Ld.
was
subsequently
entered
into,
wherein
Head
agreed
to
drill
the
well
according
to
the
terms
and
conditions
therein
set
forth,
for
which
he
was
to
receive
as
consideration
therefor
the
sum
of
$30,000,
one-half
of
which,
$15,000,
was
to
be
paid
in
cash
in
monthly
instalments,
and
as
to
the
balance
the
agreement
provided
:
The
remaining
balance,
namely,
Fifteen
thousand
($15,000)
Dollars,
is
to
be
paid
out
of
the
sale
of
production
at
the
rate
of
Two
thousand
($2,000)
Dollars
per
month,
but
not
to
exceed
forty
per
cent
(40%)
of
the
net
production
coming
to
the
Owner
after
the
payment
of
all
royalties
in
connection
with
the
said
wells.
In
passing
I
might
observe
that
in
this
recited
paragraph
a
distinction
is
apparently
made
between
the
sale
of
“produc-
tion»
and
the
payment
of
“royalties.”
The
agreement
also
provided
that
if
Head
were
successful
in
placing
eight-inc
easing
at
the
depth
of
five
thousand
feet,
as
in
the
agreement
specified,
he
should
receive
a
bonus
of
$2,500,
also
payable
from
production.
This
is
not,
I
think,
of
any
special
significance
m
respect
of
the
issue
to
be
determined.
The
Trusts
and
Guarantee
Company
Ld.
was
selected
as
a
Trustee,
and
in
an
agreement
between
Sterling
Royalties
Ld.
and
the
Trustee,
dated
June
24,
1933,
the
former
agreed
to
pay
to
the
Trustee
for
the
holders
or
purchasers
of
royalties
or
percentages
or
units
of
production,
a
royalty
in
cash
at
the
current
.
•
market
value
at
the
time
and
place
of
production
of
all
the
petroleum,
natural
gas,
gasoline
gas
and
petroleum
products,
recovered-from
the
well
during
the
unexpired
residue
of
the
term
of
years
of
the
lease,
and
every
renewal
thereof,
and
the:
agreement
states
that
the
same
were
to
be
‘‘.
.
.
subject
to
the
payment
of
Twelve
and
one-half
(1212%)
per
cent,
of
the
gross
production
to
The
Calgary
and
Edmonton
Land
Corporation
Ld.:
Twelve
and
one-half
(1212%
)
per
cent.
of
the
gross
production
to
the
Sterling
Pacific
Oil
Company
Ld.,
Eight
(8%)
per
cent,
of
the
gross
production
to
the
Northwest
Company
Ld.
and
all
costs
and
expenses
necessary
for
taking
care
of
the
production
obtained
from
the
said
well,
such
payments
to
be
made
on
or
before
the
20th
day
of
the
month
next
following
the
month
for
which
the
said
royalty
or
production
is
payable.
Such
payment
to
represent
Sixty-seven
(67%)
per
cent,
of
production:
after
deducting
expenses
and
costs
of
producing
the
well.
I
am
unable
to
explain
the
introduction
of
the
Northwest
Com-
pany
but
I
assume
that
is
capable
of
easy
explanation.
In
February,
1934,
an
agreement
was
entered
into
between
the
appellants,
the
Parties
of
the
First
Part,
and
Sterling
Royalties
Ld.
the
Party
of
the
Second
Part.
At
this
date
it-
appears
that
the
well
had
been
brought
into
production,
certain
units
of
production
had
been
sold
from
which
Head
had
been
paid
the
first
instalment
of
his
contract
price,
and
the
remaining
units
or
percentages
of
production
had
been
transferred
to
the
appellants.
This
agreement
recites
that
under
the
agreement
of
June
1,
1933,
between
the
same
parties,
it
was
agreed
that
after
the
sale
of
sufficient
royalties
to
secure
the
drilling
of
the
well,
the
remaining
royalties
or
units
of
production
were
to
be
divided
among
the
appellants
as
part
of
the
consideration
for
their
assignment
of
the
lease
to
Sterling
Royalties
Ld.
;
and
that
it
was
agreed
that
certain
costs
and
charges
now
amounting
to
approximately
$20,000—but
which
turned
out
to
be
$16,333.50—
should
be
borne
by
the
appellants,
in
which
was
included
the
$15,000
which
was
to
be
paid
to
Head
out
of
production.
The
agreement
then
provides:
1.
The
Parties
of
the
First
Part
hereby
agree
to
pool
their
royalties
or
percentages
of
production
for
the
purpose
of
paying
all
costs,
charges
and
expenses
agreed
to
be
paid
by
them
and
amounting
to
approximately
Twenty
thousand
($20,000)
Dollars,
the
details
and
items
of
which
said
amount
are
well
known
to
each
of
the
Parties
of
the
First
Part,
and
include
the
bonus
of
Fifteen
thousand
($15,000)
Dollars
payable
to
Hilary
H.
Head
under
a
drilling
agreement
with
2.
The
Parties
of
the
First
Part
further
agree
to
pool
the
proceeds
of
the
said
royalties
or
percentages
of
production
for
the
purpose
of
paying
the
said
costs
and
charges.
3.
That
the
proceeds
derived
from
the
said
royalties
be
paid
to
the
Party
of
the
Second
Part
for
the
purpose
of
paying
the
said
costs
and
charges
as
hereinbefore
set
out.
4.
That
the
production
of
this
agreement,
or
a
copy
thereof,
to
The
Trusts
and
Guarantee
Company
Limited,
shall
be
sufficient
warrant
and
authority
for
that
company
to
pay
to
the
Party
of
the
Second
Part
the
proceeds
of
the
said
royalties
held
by
the
Parties
of
the
First
Part
as
hereinbefore
agreed,
and
for
the
purpose
herein
set
forth:
this
agreement
to
remain
in
full
force
and
effect
until
all
the
said
costs
and
charges
aforesaid
have
been
paid
in
full
and
until
this
agreement
is
determined
and
discharged
by
a
majority
vote
of
the
shares
held
by
the
Parties
of
the
First
Part
and
the
Party
of
the
Second
Part.
J
This
agreement,
it
will
be
perceived,
provides
for
a
pooling
of
the
remaining
units
of
production,
which,
it
is
agreed,
had
been
allotted
and
transferred
to
the
appellants,
for
the
purpose
of
liquidating
the
indebtedness
due
Head
for
drilling,
namely,
$16,333.50,
and
which
amount
was
a
charge
upon
such
“remaining
units
or
percentages
of
production
‘
‘
which
came,
or
were
coming,
to
the
appellants;
and
the
agreement
authorized
the
Trustees
to
pay
to
Sterling
Royalties
Ld.,
from
the
proceeds
of
such
pooled
units
of
production,
sufficient
to
liquidate
the
indebtedness
to
Head,
that
is,
the
“costs,
charges
and
expenses’’
which
the
appellants
had
agreed
to
pay.
Whether
the
full
amount
of
$16,333.50
was
payable
to
Head,
or
whether
a
portion
of
it
was
payable
to
other
creditors,
is
not
clear,
but
apparently
nothing
turns
upon
that.
Now
what
emerges
from
all
this?
The
appellants
acquired
the
leased
area
from
Pacifie
Oil
Company.
They
obligated
themselves
to
drill
a
well
thereon.
Then
the
appellants
assigned
the
lease
to
Sterling
Royalties
Ld.
The
latter
undertook
to
drill
the
well,
to
sell
sufficient
units
of
production
for
securing
the
necessary
amount
of
capital
to
pay
for
the
drilling
of
the
well,
to
pay
over
to
the
Head
Lessor
and
others
certain
stated
royalties,
and
to
transfer
to
the
appellants
the
remaining
units
of
production.
The
undertaking
was
to
be
financed
from
the
sale
of
units
of
production
and
not
from
the
sale
of
shares
in
Sterling
Royalties
Ld.,
and
any
profits
and
gains
derived
from
the
undertaking
were
to
be
distributed
among
the
holders
of
units
of
production
as
their
several
interests
would
appear.
Sterling
Royalties
Ld.,
which
was
controlled
if
not
wholly
owned
by
the
appellants,
did
not
sell
the
requisite
number
of
units
of
production
wherefrom
to
pay
Head
his
full
contract
price
for
drilling
the
well:
It
is
to
be
inferred
from
the
evidence
that,
after
Head
was
paid
in
cash
the
first
instalment
of
his
contract
price,
from
sales
of
units
of
production
to
the
public
I
assume,
the
remaining
units
were
transferred
to
the
appellants,
amounting
it
appears
to
3012
per
cent
of
the
entire
units
of
production.
But
those
units
of
production
were
charged
with
the
payment
of
the
second
instalment
of
Head’s
contract
price,
the
appellants
having
agreed
to
pay
the
same,
and
which
payment
was
contingent
upon
production.
As
payment
of
the
last
instalment
of
Head’s
contract
price
was
contingent
upon
production,
the
transfer
of
the
remaining
units
to
the
appellants,
subject
to
a
charge
for
the
payment
of
the
said
instalment,
would
seem
a
convenient
arrangement.
to
adopt
in
the
circumstances,
in
fact
some
such
arrangement
was
imperative
on
account
of
sufficient
units
of
production
not
having
been
sold
to
the
public,
prior
to
the
transfer
of
the
remaining
-
units
to
the
appellants.
After
the
said
transfer
Sterling
Royalties
was
without
any
source
of
income.
But
it
was
only
the
units
of
production
transferred
to
the
appellants
that
were
made
liable
for
this
charge.
The
appellants
were
under
covenant
to
Pacific
Oil
Company
to
drill
the
well,
and,
as
the
real
promoters
of
the
undertaking,
they
were
interested
in
establishing
whether
or
not
the
leased
area
was
likely
to
produce
oil
or
gas
in
commercial
quantities,
and
if
successful
in
that
regard,
in
making
provision
for
the
payment
of
the
second
instalment
of
Head’s
contract
price.
Accordingly
they
agreed
that
their
units
of
production
should
be
charged
with
the
payment
of
that
portion
of
Head’s
contract
price.
This
has
every
appearance
of
saying
that
if
the
well
came
into
production
the
payment
of
the
last
instalment
of
Head’s
contract
price
was
to
be
taken
from
the
proceeds
derived
from
the
appellants’
units
of
production,
that
is,
from
the
proceeds
or
income
distributable
among
the
appellants
from
the
sale
of
any
production
belonging
to
them.
The
appellants
therefore
having
agreed
to
pay
any
"‘costs
and
charges’’
becoming
due
and
owing
to
Head,
then
believed
to
be
approximately
$20,000,
they
later
agreed
with
Sterling
Royalties
Ld.
that
their
individual
units
of
production
so
charged
should
be
pooled
for
the
purpose
of
paying
from
any
proceeds
or
income
therefrom
any
costs
and
charges
owing
Head;
and
the
Trustee
was
authorized
to
pay
to
Sterling
Royalties
Ld.,
from
such
source,
such
sum
as
would
liquidate
the
indebtedness
to
Head
on
account
of
his
drilling
contract.
Such
proceeds
would
therefore
come
from
any
net
production
credited
to
or
distributable
among
the
appellants
from
the
units
of
production
held
by
them.
In
the
result,
the
proceeds
of
the
units
of
production
transferred
to
the
appellants,
and
pooled,
were
diminished
by
such
an
amount
as
was
necessary
to
pay
the
balance
of
Head’s
claim,
and
while
that
portion
of
such
proceeds,
amounting
to
$16,333.50,
never
came
into
the
hands
of
the
appellants,
yet
the
same
was
paid
over
to
Head
by
Sterling
Royalties
Ld.,
upon
the
direction
of
the
appellants.
Virtually
it
was
a
payment
made
by
the
appellants.
The
claim
now
made
on
behalf
of
the
Crown
is
that
the
appellants
are
liable
for
the
income
tax
upon
that
portion
of
the
proceeds
derived
from
their
pooled
units
of
production
which
was
applied
in
settlement
of
Head’s
claim,
and
which
it
is
asserted
was
income
received
by
the
appellants.
The
appellants
contend
that
they
did
not
receive
all
the
proceeds
of
such
pooled
units
of
production,
but
only
in
a
diminished
amount,
the
difference
being
expressed
by
the
sum
of
$16,333.50
paid
to
Head,
and
that
they
should
not
be
taxed
therefore
on
something
which
they
never
received.
The
point
for
determination
is
not
free
entirely
from
difficulties,
but
the
contention
of
the
Crown
must,
I
think,
prevail.
The
appellants
were
the
holders
of
the
remaining
units
of
production,
and
having
undertaken
that
their
units
of
production
should
bear
the
‘‘costs
and
charges’’
in
question
they
agreed
that
there
should
be
taken
from
the
proceeds
of
their
pooled
production
units
sufficient
to
pay
the
claim
of
Head,
which
was,
I
think,
a
payment
made
at
the
request
of
the
appellants
out
of
the
income
coming
to
them
as
the
holders
of
their
units
of
production.
This
was
merely
saying:
‘‘You,
Sterling
Royalties
Ld.,
pay
out
of
any
proceeds
coming
to
us
from
our
pooled
units
of
production
sufficient
to
pay
the
balance
of
Head’s
contract
price
for
drilling
the
well.
’
’
The
second
instalment
of
the
drilling
contract
price
could
only
come
from
the
proceeds
of
the
units
of
production
held
by
the
appellants,
and
not
from
the
units
of
production
held
by
others,
because,
as
already
stated,
no
further
units
then
remained
in
the
hands
of
Sterling
Royalties
Ld.
or
the
Trustee.
It
was
a
part
of
the
consideration
for
the
assignment
of
the
lease
to
Sterling
Royalties
Ld.
that
the
units
of
production
transferred
to
the
appellants
should
be
charged
with
the
payment
of
the
second
instalment
of
Head’s
contract
price,
if
the
well
came
into
production.
The
source
of
the
payment
to
Head
was
in
the
nature
of
a
dividend,
or
a
profit
or
gain,
earned
and
distributable
to
the
appellants
from
their
production
units,
in
the
proportions
in
which
each
held
shares
in
Sterling
Royalties
Ld.
The
payment
to
Head
might
be
regarded
as
being
in
the
nature
of
a
capital
investment
made
by
the
appellants
from
income
derived
from
their
units
of
production,
and
which
investment
the
appellants
had
agreed
to
make
if
the
well
came
into
production.
In
effect
it
increased
the
equity
of
the
appellants
in
the
undertaking
which
otherwise
would
have
been
less
by
that
number
of
units
of
production
represented
by
$16,333.50.
It
is
not
correct
therefore,
I
think,
to
say
that
the
appellants
never
received
consideration
for
that
which
was
paid
to
Head;
they
received,
or
there
was
available
for
distribution
among
them,
$16,333.50,
as
part
of
their
share
in
earned
proceeds
of
production;
but,
upon
their
order
that
sum
was
paid
over
to
Head
to
liquidate
a
debt
due
him
which
increased
their
equity
in
the
net
proceeds
of
production
available
for
future
distribution
among
unit
holders;
it,
at
least,
released
the
charge
or
encumbrance
recorded
against
their
holdings
of
units
of
production
in
the
books
of
the
Trustee
and
restored
the
full
face
value
of
the
same,
and
this
was
done
by
the
application
of
their
own
income
received
from
production.
If
the
requisite
number
of
units
to
produce
$16,333.50
had
been
subscribed
for
by
members
of
the
public
any
payments
made
thereon
by
subscribers
could
not
have
been
claimed
as
an
allowable
deduction
in
assessing
income
tax.
And
the
situation
is,
I
think,
analogous
so
far
as
the
appellants
are
concerned;
because
they
directed
that
so
much
of
the
income
payable
or
distributable
to
them
from
their
units
of
production
be
diverted
to
Sterling
Royalties
Ld.
by
the
Trustee,
to
liquidate
a
debt
owing
to
Head
by
Sterling
Royalties
Ld.,
and
which
was
incurred
for
capital
purposes.
The
transaction
might
also
be
regarded
as
the
purchase
from
income
of
Head’s
right
to
the
proceeds
of
a
certain
amount
of
production.
The
appellants
purchased
from
Head,
his
right
to
certain
proceeds
of
production,
from
their
own
income,
so
as
to
avoid
the
sale
of
any
of
their
units
of
production
to
the
public.
The
amount
owing
Head
on
the
second
instalment
of
his
contract
price
was
to
come
from
the
sale
of
production,
it
was
payable
contingent
upon
production,
and
the
appellants
agreed
from
the
first
that,
if
production
came,
their
units
of
production,
that
means
any
proceeds
or
income
derived
therefrom,
would
stand
charged
with
the
payment
of
that
amount.
If
payment
of
that
portion
of
Head’s
contract
price
is
not
to
be
treated
as
purely
an
obligation
of
the
appellants
then,
it
seems
to
me,
the
public
which
had
purchased
other
units
would
be
unfairly
treated
because
it
was
not
their
obligation
to
pay
any
part
of
this
debt
from
the
proceeds
of
their
production
units;
this,
I
think,
the
appellants
never
contemplated
because
they
plainly
agreed
that
any
amount
owing
Head
on
account
of
the
second
instalment
of
his
contract
price
would
be
charged
only
against
their
right
to
any
income
distributable
from
production.
The
income
from
which
Head’s
claim
was
paid
came
directly
from
the
sale
of
production
belonging
to
the
appellants,
which,
it
seems
to
me,
is
just
the
same
as
if
it
came
from
any
other
income
which
they
might
have
received
and
possessed.
Whatever
the
form
which
the
payment
to
Head
took,
the
source
of
the
payment
must,
I
think,
be
treated
as
the
income
of
the
appellants,
as
in
substance,
I
think
it
was.
That
being
so
I
do
not
think
it
was
a
disbursement
for
which
any
deduction
may
properly
be
claimed.
The
appeal
is
therefore
dismissed.
In
all
the
circumstances
here
I
do
not
think
there
should
be
any
order
as
to
costs.
Judgment
accordingly.
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