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 per cent and a withholding tax of 10

per cent in India and will not be eligible for tax credit in the US. The software developed 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 Rs.15,00,000

Man power cost (80 software professional will be working for 10 hours each day) Rs.400 per man hour

Administration and other costs Rs.12,00,00

Advice the US company on financial viability of the project. The rupee dollar rate is Rs.48/$.