In the case of Great Western Power Company of California v. Commissioner of Internal Revenue, 1935, the Supreme Court ruled on a dispute over tax deductions. The power company had claimed depreciation and depletion allowances for its hydroelectric plants as part of its federal income taxes. However, the Commissioner disallowed these claims arguing that they were not permissible under existing tax laws because there was no physical exhaustion or wear and tear to justify such deductions in relation to water rights used by hydroelectric companies. The court sided with the Commissioner stating that while tangible property may depreciate due to physical deterioration over time, this does not apply to intangible assets like water rights which do not physically deteriorate. Therefore, it held that depleting reserves are only applicable when there is an actual reduction in quantity such as minerals or oil wells but cannot be applied broadly across all types of properties especially those without any form of physical diminution. This decision clarified how different kinds of properties should be treated under tax law regarding depreciation and depletion allowances.

The dissenting opinion in the case of Great Western Power Company of California v. Commissioner of Internal Revenue argued that the majority's decision was inconsistent with previous rulings and misinterpreted tax law. The dissent, led by Justice Stone, contended that the company should not be allowed to deduct from its gross income a sum representing depreciation on property used for producing power because it had already received compensation through rates charged to consumers which included an allowance for such depreciation. They believed this amounted to double deduction and contradicted established principles governing deductions for exhaustion, wear and tear, or obsolescence under existing tax laws. Furthermore, they asserted that allowing such deductions would result in inequitable treatment among taxpayers as only those who could pass on their costs to customers would benefit while others bearing similar costs could not avail themselves of comparable relief.