The assessee, engaged in providing digital mapping, software development and support services to its associated enterprises, challenged the inclusion of certain comparables selected by the Transfer Pricing Officer. The Tribunal held that companies engaged in activities functionally different from the assessee, including engineering services, medical transcription and information technology-enabled services, could not be regarded as valid comparables for software development or production services. It further held that comparables with distorted segmental results due to substantial unallocated expenditure were also liable to be excluded. On exclusion of the functionally dissimilar comparable, the assessee’s profit margin fell within the permissible tolerance range of ±5 per cent. The Tribunal also directed the Transfer Pricing Officer to explain the computation of the profit margin of one comparable and re-determine its inclusion after granting an opportunity of hearing to the assessee. (AY. 2012-13)