The suit was for tax refund. The claim was that plaintiff, within Section 101, Revenue Act of 1936, 26 U.S.C.A. Int.Rev.Code § 101, was a Club “organized and operated exclusively for pleasure, recreation, and other nonprofitable purposes, no part of the net earnings of which inures to the benefit of any private shareholder.” The defense was that, in the year in question, the Club executed an oil lease upon its club property, for a consideration of a cash bonus, reserved oil payments and a royalty and in that year received, $11,554.46, $7,-500 as bonus, and $4,004.44 as royalty, and therefore was not, within the exemption, being operated exclusively for pleasure, recreation and other non-profitable purposes. On stipulated facts,1 showing that the operations conducted by the Club continued to be the same before as after the lease, that all operations under the lease were conducted by the lessee, none by the Club, and that not a dollar of the net earning inured to the benefit of any private shareholder, the district judge found for plaintiff and gave judgment accordingly.

The Commissioner upon the authority of West Side Tennis Club v. Com’r, 2 Cir., 111 F.2d 6, 130 A.L.R. 103; Jockey Club v. Helvering, 2 Cir., 76 F.2d 597 is here insisting that the case was wrongly decided and should be reversed. We do not *454think so. Both of those cases were decided as they were because as the court pointed out, while the clubs in question were organized for lion-profitable purposes, they were not so operated. In each of those cases the club was actively engaged in operating non club activities, the business of public amusement or entertainment, from which it derived from the public generally, and not merely from its members, large revenues. In the Jockey Club case, where receipts and expenses were $80,000 to $85,-000, the court said “what we need is a comparison between the outside activities of the club and their costs, but no such comparison is possible.” In the Tennis Club case, the club had expended a great deal of money to erect a stadium to accommodate the public and during the taxable year, the club had taken in large sums from the public. Here, the club had nothing to do with the operation of the oil wells. The money that it got from the lease and the operations of its lessee, was merely an incident to the ownership of the land and no more converted the club into a corporation operating for profit, than it would have been converted if it had sold part of the lands outright as the Santee Club 2 did, or if it had only gotten a large bonus for an unproductive lease, as in the Koon Kreek Klub3 case, and no royalty.

The statute expressly gives the exemption to clubs operated as this one was and as long as the exemption holds, all revenues, of the club without regard to their source, are exempt from tax, because under the statute it is the nature and character of the operations of the club and the use made of the revenues, and not their source, which determines the exemptions. The judgment was right. It is affirmed.

(dissenting).

In Santee Club v. White, 1 Cir., 87 F.2d 5, a portion of the club’s property not usable for club purposes was sold off at a profit, but the club was operated as before. In Koon Kreek Klub v. Thomas, 5 Cir., 108 F.2d 616, an oil lease was made for a bonus paid, but no oil well was ever drilled or operated. Here the club made a lease covering the whole of the club’s lands, and in addition to a bonus, is receiving large sums continuously from oil payments and royalties, directly from the operation of oil wells on its golf courses. Receipts from this source in the tax year, and each year since have about doubled the club’s income. Whatever the local view under Texas law, under the federal tax laws what is received from oil payments is not mere purchase money for oil sold, but is the enjoyment of the mineral right in the land, for the exhaustion of which a depletion allowance is to be had. Dearing v. Commissioner, 5 Cir., 102 F.2d 91. This is even more clearly true of royalties. This club has elected thus to use its properties in addition to the ordinary club uses. It is operating for oil, as well as for golf. That it does not pump the wells itself is immaterial. It shares continuously in what the wells produce. So long as this goes on, I think it is not a club “ * * * operated exclusively for pleasure, recreation, and other nonprofitcuble purposes.”