CO-CO connection means the call, that is setted between 2 CO-lines by transfer or forwsrd feature.
Ex.: Call from external party comes to your company through CO-line #1. Secretary answers the call and then transfers this call through CO-line #2 to outside party (boss's mobile phone) - now you have CO-CO call between CO #1 and CO #2.
If you have CO-CO call through analog lines only, and your provider doesn't support CPC or Polarity Reverse signal (indication of call end) - you MUST to limit CO-CO calls by timer, otherwise both CO-lines will be busy forever.
And even when you use digital lines or analog lines with CPC or Polarity Reverse signal - you CAN limit CO-CO calls by timer.
The same mention is for Extension-CO call - you CAN limit it by timer (and there is no matter what is the direction of such call: incoming or outgoing).