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10. A USA based company is planning to set up a software development unit in India. Software developed at the Indian unit will be bought
10. A USA based company is planning to set up a software development unit in India. Software developed at the Indian unit will be bought back by the US parent at a transfer price of US $10 millions. The unit will remain in existence in India for one year; the software is expected to get developed within this time frame. The US based company will be subject to corporate tax of 30% and additional withholding tax of 10% in India and will not be eligible for tax credit in the US. The software developed I will be sold in the US market for US $ 12.0 millions. Other estimates are as follows: Rent for fully furnished unit with necessary hardware in India Man power cost (80 software professional will be working for 10 hours each day) Administrative and other costs 1500000 400 per man hour 12,00,000 Advise the US Company on the financial viability of the project. The rupee-dollar rate is *48/$. Note: Assume 365 days a year
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