Sigma Exploration Ltd. v. The Queen, 75 DTC 5121, [1975] CTC 215 (FCTD)

The taxpayer, which carried out seismic surveys primarily on its own account and then sold the information so obtained to other companies, was permitted to deduct a payment of $60,000 to a bankrupt company for the purchase of seismic data and payments of $214,000 made to its U.S. parent for the purchase of digitalized well logs in order that the taxpayer could commence the marketing of digitalized well log data (which latter expenditure was treated as a deferred charge for accounting purposes). The taxpayer's intention "was to bring into inventory information which it reasonably expected to market quickly and produce revenue or income".

The taxpayer, which carried out seismic surveys primarily on its own account and then sold the information so obtained to other companies, was permitted to deduct a payment of $60,000 to a bankrupt company for the purchase of seismic data and payments of $214,000 made to its U.S. parent for the purchase of digitalized well logs in order that the taxpayer could commence the marketing of digitalized well log data (which latter expenditure was treated as a deferred charge for accounting purposes). If "the expenditure is a reasonable one for legitimate income-earning and business purposes, and not in its true light a vehicle primarily to minimize tax, then no matter how drastically income may be diminished, I do not think the transaction can, or ought to be, at the same time characterized as an unreasonable reduction of income, or an unreal or unnatural reduction".