13 . the appellants , immediately after the determination of the appeal , declared to us their dissatisfaction therewith as being erroneous in point of law and in due course required us to state a case for the opinion of the high court pursuant to the finance act , 1937 , fifth schedule , part 2 , paragraph 4 , and the income tax act , 1952 , section 64 , which case we have stated and do sign accordingly . 14 . the question of law for the opinion of the high court is whether the sum of &amp;pound;4,072 referred to in paragraph 2 hereof was an amount applied for the benefit of Mr Hawke within the meaning of section 36 ( 1 ) ( c ) of the finance act , 1947 . R W Quayle N F Rowe Commissioners for the special purposes of the income tax acts . Turnstile House , 94-99 , High Holborn , London , W.C.1 . 5th October , 1959 . the case came before Cross , J , in the Chancery division on 13th July , 1960 , when judgment was given in favour of the crown , with costs . Sir Lynn Ungoed-Thomas , Q.C , and Mr Alan Orr appeared as Counsel for the crown , and Mr P J Brennan for the company . Cross , J - this case concerns the profits tax liability of the respondent company , H Dunning &amp; Co ( 1946 ) , Ltd , for two chargeable accounting periods , 1st March , 1955 , to 31st October , 1955 , and 1st November , 1955 , to 29th February , 1956 . the question arises in this way . the company was incorporated in 1946 , and carries on the business of light engineering . it is director-controlled , within the meaning of the profits tax legislation . a Mr Hawke has been a director of the company since its incorporation , though he is not a whole-time service director , and he has been at all material times a member of the company holding one &amp;pound;1 share out of the 1,000 issued shares . in 1951 Mr Hawke invented a special type of cable gland for engineering purposes and obtained patent protection for this invention some time in 1952 . on 31st December , 1954 , he entered into an agreement with the company whereby he granted to the company a licence for a period of years to manufacture and to sell the patented article , and the company covenanted during the continuance of the licence to pay him a commission of &amp;pound;7 10 s per cent of the selling price of each patented article . there was provision for the termination of the agreement before the expiry of the period , and it was in fact terminated in September , 1955 . it is found in the case that that was a perfectly genuine commercial agreement under which the company got full consideration for the payments which they had to make to Mr Hawke . the total of the payments which were made under the agreement for the period from 1st March , 1955 , to its termination in September , 1955 , was &amp;pound;4,072 , and the whole question at issue is whether or not these payments were distributions by the company within the meaning of section 36 of the finance act , 1947 . if they were distributions , then , on the assumption which hitherto has been made that they would not be deductible for the purpose of ascertaining the gross relevant distribution for the purpose of section 35 , the amount of profits tax payable by the company for the accounting periods in question would be larger than it would be if the payments were not distributions . section 36 ( 1 ) is in these terms : subject to the provisions of the next succeeding subsection , wherever - ( a ) any amount is distributed directly or indirectly by way of dividend or cash bonus to any person ; or ( b ) assets are distributed in kind to any person ; or ( c ) where the trade or business is carried on by a body corporate the directors whereof have a controlling interest therein , - which is the case here - an amount is applied , whether by way of remuneration , loans or otherwise , for the benefit of any person , there shall be deemed for the purposes of the last preceding section to be a distribution to that person of that amount or , as the case may be , of an amount equal to the value of those assets : - then there is a proviso - provided that no sum applied in repaying a loan or in reducing the share capital of the person carrying on the trade or business shall be treated as a distribution . that proviso certainly seems to suggest that , if it were not there , a sum applied by the company in repaying a loan would be a distribution . I do not think I need read sub-section ( 2 ) , but sub-section ( 3 ) contains special provisions in regard to loans , to this effect : where - ( a ) a loan has been treated as part of the gross relevant distributions to proprietors for a chargeable accounting period ; and ( b ) as a result , the amount of tax payable for that period has been increased , then , if the loan is repaid , the gross relevant distributions to the proprietors are to be treated as reduced by the amount corresponding to the increase caused by treating the loan as a distribution . the question which I have to decide is , of course , whether these payments were amounts applied by the company for the benefit of Mr Hawke by way of remuneration , loans or otherwise . they were certainly not remuneration or loans ; but do they come under the head of or otherwise ? they were , as I have said , payments made under a commercial agreement for full consideration given by Mr Hawke to the company in the form of a grant to the company of a licence to exploit his patent . if the words had been simply an amount is applied for the benefit of any person , I should have thought it very doubtful whether this sub-section would have covered payments , whether of capital or income , under an ordinary commercial agreement . according to the ordinary use of the English language , a payment for which you have given full consideration is not an amount applied for your benefit by the payer . but , of course , the words are not simply an amount is applied for the benefit of any person ; there are the additional words whether by way of remuneration , loans or otherwise . in Commissioners of inland revenue v Chappie , Ltd , 34 T.C 509 , the court of appeal had to consider the case of loans made by a company to one of its members , an associated company , on what were found to be ordinary commercial terms , and the court , affirming the decision of Danckwerts , J , held that such a loan was a distribution within the meaning of this section . it has been argued by Mr Brennan in this case that the decision turned simply on the special provisions made in regard to loans . the section , of course , refers to loans expressly , and there is in sub-section ( 3 ) a provision for adjusting the matter if and when the loan is repaid . in the case of loans , therefore , it is particularly difficult to avoid the conclusion that they count as distributions even if they are made on commercial terms ; but I do not regard the decision in the Chappie case as throwing no light on the construction of the rest of this sub-section . the members of the court of appeal , as I read their judgments , definitely rejected the idea that there had to be an element of bounty in a payment in order to bring it into the scope of the section . it is true that they were dealing with loans , but they were construing the section as a whole . the section expressly refers to remuneration as well as loans . remuneration does not normally contain any element of bounty , yet the sub-section says that all payments by way of remuneration are to be treated as distributions . it is , therefore , very difficult to say that what falls under the heading or otherwise as opposed to what falls under the heading remuneration or loans must contain an element of bounty . then it is said : if you read the sub-section as widely as that , any payment made by a company , whether it be an income or a capital payment , and whether there is consideration for it or not , will be a distribution . if the company buys a motor-car from a member for a proper price , even that will be a distribution . well , it appears to me that the members of the court of appeal in the Chappie case were aware that that might be the result of their decision . that is shown by what was said by Mr Tucker and Jenkins , L.J , at the end of the case ( at page 527 of this report ) . but , of course , it is true to say that the decision itself related only to loans . the section was considered again a little later by Harman , J , in Commissioners of inland revenue v Lactagol , Ltd , 35 T.C 230 . there the company had made a lump-sum payment to a director-member , Mr Adams , in consideration of a covenant that after his term of service with the company ceased he would not compete with the company . so for a lump-sum payment the company got the benefit of a capital asset in the form of Mr Adams &apos;s covenant . Harman , J , was impressed , as anybody must be , with the absurdity of treating such a payment - a capital payment for a capital asset under a genuine commercial transaction - as being an amount applied for the benefit of the payee . he was not prepared to accept the view that in the Chappie case the court of appeal had decided that all payments were distributions . he thought that a line must be drawn somewhere , and influenced , I think , by the fact that this act taxes profits , he drew the line at payments of capital for capital assets . whether it is really logical to draw any line or to draw it there it is not for me to say . if I were faced with a similar case to that which was before Harman , J , I should , of course , follow his decision . but the case before me is not one of a payment of capital for a capital asset , but of recurring payments of income . I do not therefore think that decision of Harman , J , covers this case , and I feel myself at liberty to reach the conclusion at which , but for his decision , I would have arrived without hesitation in view of the decision of the court of appeal in the Chappie case . I should have said that the Commissioners decided this case in favour of the taxpayer on the ground that the Chappie case dealt only with loans , and that this case was covered by the Lactagol case . for the reasons I have tried to give , I think that their decision was wrong , and therefore I shall allow the appeal . Sir Lynn Ungoed-Thomas . - your lordship will , then , allow the appeal with costs ? Cross , J - yes . Mr P J Brennan . - would your lordship hear me on that point about costs ? Cross , J - yes . Mr Brennan . - my Lord , the Lactagol case was decided some years ago , and this matter has been left in a state of grave uncertainty ; and my clients went before the Commissioners on the basis of the Lactagol case . they succeeded before the Commissioners , and I submit that it might be a proper case where your lordship might make an order whereby each side would bear its own costs . Sir Lynn Ungoed-Thomas . - my Lord , it is the same sort of difficulty that arises in any case where there has been a decision upon which one side relies . Cross , J - I think I must allow the crown to have their costs in this case . I quite understand that the Commissioners were in a difficulty in view of the two authorities , but I have taken a different view of Harman , J. &apos;s decision to that taken by them , and I think the ordinary result must follow . Sir Lynn Ungoed-Thomas . - and would your lordship make a declaration ? Cross , J - yes . there is no question of figures , is there ? 