The Court addressed transfer pricing under s. 69(2) of the Income Tax Act in a dispute over the reasonableness of amounts paid by a Canadian taxpayer to a non-arm’s length supplier for ranitidine.
It held that determining a reasonable arm’s length amount requires consideration of economically relevant circumstances, including linked agreements conferring rights and benefits beyond mere supply where those agreements affect pricing.
The Tax Court erred in excluding the Licence Agreement from the comparability analysis.
The matter was properly remitted for redetermination of the reasonable amount with regard to the linked rights and benefits.
The appeal and cross-appeal were dismissed.
