Primacy of Commercial Substance and the "Look At" Approach

In evaluating complex cross-border corporate structures and investment holdings, courts and tax authorities must apply the "look at" test, analyzing the entire transaction holistically rather than using a dissecting or isolated approach. While parent companies naturally exercise supervisory guidance over subsidiaries, a subsidiary with real economic substance, local operational expenses, independent board governance, and long-term commercial goals cannot be treated as a sham or mere puppet. However, where an entity lacks genuine commercial or business substance and is interposed solely to achieve tax avoidance, the corporate veil may be pierced to discard the artificial interposition and tax the underlying real transaction.(The authority for advance rulings Vs Tiger Global International II holdings) | 2026 INSC 60)