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Appellants challenged TP adjustments on interest on receivables and management fees paid for intra-group services. Regarding receivables, HC relied on precedents holding that outstanding receivables beyond a period cannot be re-characterized as loans if impact is factored in working capital and pricing. On management fees, HC held TPO cannot doubt commercial expediency or disallow expenditure incurred for business purposes unless unrelated parties would not undertake it. TPO cannot restructure transactions unless economic substance differs from form or arrangements differ from those adopted by independent enterprises acting rationally. Expenditure on brand promotion cannot be disallowed if adequately compensated. Decision favored appellants.
Appellants challenged TP adjustments on interest on receivables and management fees paid for intra-group services. Regarding receivables, HC relied on precedents holding that outstanding receivables beyond a period cannot be re-characterized as loans if impact is factored in working capital and pricing. On management fees, HC held TPO cannot doubt commercial expediency or disallow expenditure incurred for business purposes unless unrelated parties would not undertake it. TPO cannot restructure transactions unless economic substance differs from form or arrangements differ from those adopted by independent enterprises acting rationally. Expenditure on brand promotion cannot be disallowed if adequately compensated. Decision favored appellants.
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