In the case of Grumman v. United States in 1961, the Supreme Court had to decide whether or not a taxpayer could deduct from gross income amounts paid for insurance premiums on policies covering loss of earnings due to war and other risks that were excluded from coverage under its business interruption insurance policy. The court ruled against Grumman, stating that these payments were capital expenditures rather than ordinary and necessary business expenses. Therefore, they could not be deducted from gross income as per Section 23(a)(1)(A) of the Internal Revenue Code of 1939. This decision was based on their interpretation that such payments served to protect Grumman's profit-making structure itself rather than being an expense incurred during its operation.

In the dissenting opinion for Grumman v. United States, the justice argued that the majority's decision to uphold a tax assessment against Grumman was incorrect because it failed to properly interpret and apply relevant provisions of the Internal Revenue Code. The dissenting justice believed that Congress intended for manufacturers like Grumman to be able to deduct research and development costs as ordinary business expenses in order to encourage innovation in American industry. By denying these deductions, he felt that the Court was discouraging companies from investing in research and development which could ultimately harm economic growth. He also disagreed with how the majority interpreted "reasonable allowance" within Section 167(a) of IRC, arguing they were too restrictive in their interpretation which led them not allowing full deduction of R&D expenditures by businesses under this provision.