Petro-Canada v. Canada, 2004 DTC 6329, 2004 FCA 158 -- summary under Paragraph 251(1)(c)

Joint exploration corporations (the "JECs") acquired seismic data from one of the two shareholders of each JEC at a purchase price substantially in excess of fair market value and, later, renounced resulting alleged Canadian exploration expense to the other shareholder, namely, the taxpayer. Each JEC did not attempt to negotiate a volume discount and the JEC was indifferent to the purchase price as the purchase price was funded by the two shareholders. In finding that the purchase was not an arm's length transaction, Sharlow J.A. stated (at p. 6338) that the JECs "were captive to the common interests of their respective shareholders, who acted jointly in dictating the terms upon which the seismic data would be purchased".