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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Tax Planning and Location of Business

An arrangement is declared an impermissible avoidance arrangement because it lacks commercial substance and uses an accommodating party. Which consequence is NOT supported by the Act's list of consequences?

The unsupported option is that consequences are restricted only to denial of the tax benefit. The Act's list of consequences is inclusive, not limited, and covers disregarding or recharacterising steps, disregarding accommodating parties, changing situs or residence, and looking through corporate structures.

  1. ADisregarding the accommodating party or treating it and another party as one person
  2. BTreating the situs of a transaction at a place other than that shown in the arrangement
  3. CLooking through the arrangement by disregarding a corporate structure
  4. DRestricting the consequences only to denial of the tax benefit, excluding recharacterisation of stepsCorrect

Explanation

The consequences include, but are not limited to, disregarding or recharacterising steps, disregarding accommodating parties, relocating situs and looking through structures. The list is inclusive, so confining the outcome to denial of benefit alone is not what the Act says.

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