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tranfer pricing

kunal (partner) (90 Points)

01 June 2010

hey frnds...
the parent company is indian company & its subsidary company is in uganda.. subsidary company in uganda has been received from indian parent company... so indian company has received interest income from its subsidary... also tds has been deducted by uganda subsidary @ 10% as per DTAA agreement.

the question is how to treat this income by indian parent company in income tax return and whether transfer parcinig provision is applicable or not?? tds deducted buy uganda subsidary company is allowable as tax credit or not..

reply its urgent..

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CA Amit Kanani (Practicing CA) (338 Points)
Replied 02 June 2010

whenever there is transaction between associated enterprises, tranfer prising provision applicable.

here it is also apply and we have to see rate at which loan is given by indian co. to other non associated enterprise and that rate shall be Arms lengh price and AO shall recalculate interest income at that rate if rate is higher. but if that rate is lower then 10% shall b arms lengh price b coz transfer pricing provision shall not apply if application of that provision is reduce income which is declare by person.'

and Tds credit shall available.