In the United States v. Penn Foundry & Manufacturing Co., Inc. case of 1948, the U.S Supreme Court ruled in favor of the government, upholding its right to recover excess profits from a war contract during World War II under renegotiation statutes. The defendant, Penn Foundry & Manufacturing Co., had entered into a contract with the federal government for producing munitions and argued that it was not liable for repayment as it did not make any profit due to cost overruns on another non-governmental project which led to overall losses for their company during that period. However, the court held that each individual contract should be considered separately when determining whether or not there were excessive profits made by a contractor and thus rejected this argument put forth by Penn Foundry & Manufacturing Co.

In the dissenting opinion for United States v. Penn Foundry & Manufacturing Co., Inc., it was argued that the majority's decision to uphold a tax assessment against Penn Foundry, despite its compliance with wartime price regulations, contradicted established legal principles and unfairly penalized companies who followed government directives during World War II. The dissenting justices contended that the Court should have recognized an exception to normal taxation rules given the extraordinary circumstances of war and national emergency. They believed this would be in line with Congress' intent when it enacted legislation allowing businesses to deduct from their taxable income any payments made under government contracts at prices set by federal agencies. Furthermore, they disagreed with the majority's interpretation of "gross income," arguing that it should not include amounts received as reimbursement for costs incurred in performing a contract where no profit is realized or intended. In their view, such reimbursements are not true income but merely recoupment of expenses and thus should not be subject to tax.