In the Central Illinois Public Service Co. v. United States case of 1977, the Supreme Court ruled on a dispute involving federal income tax deductions for public utilities. The Central Illinois Public Service Company claimed that it should be allowed to deduct from its taxable income certain payments made in lieu of taxes to municipalities as part of franchise agreements allowing them to operate within city limits. However, the Internal Revenue Service (IRS) disagreed and argued these were not deductible business expenses but rather capital expenditures because they secured valuable operating rights for the company. The Supreme Court sided with IRS by a vote of 6-3, holding that such payments are indeed capital expenditures and therefore not deductible under Section 162(a)(1) of Internal Revenue Code which allows deduction only for ordinary and necessary business expenses incurred during taxable year. The court reasoned that these payments were more akin to acquisition costs paid for securing long-term benefits rather than routine operational costs.

In the dissenting opinion for Central Illinois Public Service Co. v. United States, it was argued that the majority's decision to uphold a Federal Power Commission (FPC) order requiring natural gas companies to refund certain amounts to their customers was incorrect. The dissenters believed this ruling failed to consider whether these refunds were just and reasonable as required by law, instead focusing solely on whether they were in line with FPC policy objectives. They also contended that the court had overstepped its bounds by making determinations about what constituted "just and reasonable" rates - something they saw as being within the purview of Congress or administrative agencies rather than courts of law.