SNO Ltd., an Indian company, paid Interest on loan taken from a wholly owned subsidiary P Inc., UK for 35 million. The SNO identified the following…

CA Final · Direct Tax Laws and International Taxation · MTP · November 2024
SNO Ltd., an Indian company, paid Interest on loan taken from a wholly owned subsidiary P Inc., UK for 35 million. The SNO identified the following uncontrolled observations to arrive at this ALP: Observation Interest rate 1 5% 2 8% 3 14% 4 6% 5 12% 6 17% What are the values (percentages) in the dataset to be selected by the SNO while computing the arm's length interest rate applying the range concept as per Rule 10CA?
(A) 35th percentile – 8%, Median – 10%, 65th percentile – 12%
(B) 35th percentile – 14%, Median – 10%, 65th percentile – 6%
(C) 35th percentile – 4.9%, Median – 10%, 65th percentile – 11.05%
(D) Arithmetic mean – 10.33%

Suggested Answer and Working Notes:

Correct Answer: Option (A)

35th percentile – 8%, Median – 10%, 65th percentile – 12%

Topics: Transfer Pricing, Double Taxation Relief, Non-Resident Taxation

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