While legitimate tax planning executed within boundaries of statutory frameworks is legally permissible, the deployment of artificial corporate arrangements and colorable devices to reduce fiscal liabilities remains a critical challenge for modern tax administrations. The demarcation between legal tax avoidance and criminal tax evasion has historically been established through evolving judicial interpretations rather than static statutory definitions. This paper evaluates the structural mechanisms deployed by multinational enterprises to execute cross-border tax optimization, including Special Purpose Vehicles (SPVs), aggressive transfer pricing, and shell corporations situated within low-tax jurisdictions. It reviews landmark rulings such as the landmark Vodafone and Sanofi Pasteur cases alongside the statutory measures introduced by the Government of India—including General Anti-Avoidance Rules (GAAR), Place of Effective Management (POEM) benchmarks, and the integration of the OECD/G20 Base Erosion and Profit Shifting (BEPS) action plans. The study analyzes how these comprehensive reforms have transformed the Indian tax architecture, moving from formalistic text-based interpretations to economic substance-based enforcement models.