In the case of Group No. 1 Oil Corporation v. Bass, Collector of Internal Revenue (1930), the U.S Supreme Court was tasked with determining whether a tax assessment by the Commissioner of Internal Revenue against Group No. 1 Oil Corporation was valid or not. The corporation had claimed deductions for depletion and depreciation on its oil properties in its income tax returns but these were disallowed by the Commissioner leading to additional taxes being levied on it. The court held that under Section 234(a)(9) and (10) of the Revenue Act, which allowed reasonable allowance for depletion and depreciation respectively based on discovery value or cost, whichever is higher; there must be clear proof that discovery value exceeds cost before such an allowance can be made based upon it rather than cost.

In the dissenting opinion for Group No. 1 Oil Corporation v. Bass, it was argued that the majority's decision to allow a tax deduction on oil and gas leases as capital assets rather than ordinary income was incorrect. The dissenters believed this interpretation of the law could potentially lead to significant revenue loss for the government by allowing corporations to avoid paying their fair share of taxes. They contended that such deductions should only be allowed in cases where there is an actual loss or exhaustion of capital assets, not simply because they are used in business operations. Furthermore, they asserted that if Congress had intended for these types of deductions to be permissible under existing tax laws, it would have explicitly stated so within its legislative text.