In the case of Compania General de Tabacos De Filipinas v. Collector of Internal Revenue, 1928, the U.S Supreme Court ruled in favor of the tobacco company. The issue at hand was whether or not a tax imposed on leaf tobacco by Philippine law was applicable to a Spanish corporation that had been operating in the Philippines since before American sovereignty over these islands began in 1899. The court held that under an old treaty between Spain and America (the Treaty of Paris), which ended the Spanish-American War and ceded control over certain territories including Philippines to America, existing property rights were protected from new taxation unless explicitly stated otherwise by Congress. Since there was no explicit provision for this particular tax within any Congressional legislation, it could not be applied retroactively against Compania General de Tabacos De Filipinas.

In the dissenting opinion for Compania General de Tabacos De Filipinas v. Collector of Internal Revenue, Justice Oliver Wendell Holmes Jr. argued that the majority's decision was inconsistent with previous rulings and principles of international law. He contended that a foreign corporation should not be taxed on income derived from sources outside U.S jurisdiction, even if it had an office in the United States where profits were realized or received. According to him, this would amount to double taxation as such corporations are already subject to tax in their home countries based on global income. Furthermore, he expressed concern about potential retaliation by other nations which could harm American businesses operating abroad.