Commercial substance test treats tax-driven arrangements as lacking substance where business risks and cash flows remain unchanged.

An arrangement lacks commercial substance where it does not materially affect business risks or net cash flows apart from the tax advantage sought. The term tax benefit is broadly defined to include reduction, avoidance or deferral of tax or other amounts, increase in refund, treaty-based advantages, reduction in total income, and increase in loss, and may cover tangible or intangible benefits arising in the relevant or any other year.

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