Section 18(3) of the ITA provides that:

“Where a non-resident person carries on business with a related resident person and the course of such business is such that it produces to the resident person or through its permanent establishment either no profits or less than the ordinary profitswhich might be expected to accrue from that business if there had been no such relationship, then the gains or profits of such resident person or through its permanent establishment from such business shall be deemed to be of such an amount as might have been expected to accrue if the course of that business had been conducted by independent persons dealing at arm’s length.”

 According to the ITA a person is related to another if–

• either person participates directly or indirectly in the management, control or capital of the business of the other;
• a third person participates directly or indirectly in the management, control or capital of the business of both; or
• an individual, who participates in the management, control or capital of t...

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