In the 1945 case Hercules Gasoline Co., Inc. v. Commissioner of Internal Revenue, the Supreme Court was tasked with determining whether or not a gasoline company could deduct from its gross income the cost of gas that had evaporated during storage and transportation as an ordinary and necessary business expense under section 23(a) of the Revenue Act. The court ruled in favor of Hercules Gasoline Company, stating that these losses were indeed deductible because they were common, frequent, and accepted occurrences within this industry. This ruling clarified how businesses should account for natural loss when calculating their taxable income.

In the dissenting opinion for Hercules Gasoline Co., Inc. v. Commissioner of Internal Revenue, it was argued that the majority misinterpreted the tax code and its application to this case. The dissenting justices believed that Hercules should not be allowed to deduct from their gross income any amount paid as a rebate or refund on gasoline sold during World War II under price regulations established by law, because these payments were voluntary and not legally required. They contended that such deductions are only permissible when they represent an obligation or liability incurred in carrying out business operations, which was not true in this instance since there was no legal requirement for Hercules to make these refunds or rebates. Therefore, allowing them would essentially grant a double benefit: first by reducing taxable income through deduction and secondly by providing funds back into company coffers without taxation.