Appeal dismissed for late filing in AY 2010-11; E-Infochips excluded in AY 2011-12 comparables.

The appeal for AY 2010-11 was dismissed as withdrawn due to being filed after Revenue's appeal was dismissed. For AY 2011-12, the Tribunal excluded E-Infochips Ltd. from comparables due to its manufacturing activities, upheld the exclusion of five companies by CIT(A), and remanded the matter for fresh ALP determination. The judgment allowed both appeals for statistical purposes, emphasizing the need for a reasonable hearing and detailed assessment on appeal timelines, transfer pricing, and company comparability.

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Issues:
1. Appeal filed after Revenue's appeal was dismissed due to low tax effect for AY 2010-11.
2. Transfer pricing addition and comparability of companies for AY 2011-12.

AY 2010-11:
The appeal by the assessee for AY 2010-11 was withdrawn as it was filed after the Revenue's appeal was dismissed due to low tax effect. The appeal was dismissed as withdrawn.

AY 2011-12:
The assessee appealed against the order by CIT(A) regarding transfer pricing addition, while the Revenue challenged the exclusion of five companies from comparables. The assessee, a subsidiary of a US corporation, provided software development services to its parent company at cost plus a markup. The TPO determined the ALP using the TNMM and proposed adjustments. The CIT(A) upheld the inclusion of E-Infochips Ltd. and directed the exclusion of five companies, leading to appeals by both parties.

The functional profile of the assessee as a captive software development provider was crucial. E-Infochips Ltd. was included by the TPO as comparable, but the Tribunal found it engaged in significant manufacturing activities, making it incomparable to the software-only services of the assessee. E-Infochips Ltd. was excluded from comparables.

Regarding the exclusion of five companies by the CIT(A), FCS Software Solutions Ltd. was initially included by the TPO but later excluded by the CIT(A) due to its diverse revenue sources beyond software development. The other four companies were excluded based on turnover differences compared to the assessee and precedent judgments. The Tribunal upheld the exclusion of these companies from comparables.

The judgment set aside the CIT(A)'s order and remanded the matter to the AO/TPO for fresh ALP determination based on the observations and directions provided. Both appeals were allowed for statistical purposes, ensuring the assessee's right to a reasonable hearing.

In conclusion, the judgment addressed issues of appeal timelines, transfer pricing adjustments, and comparability of companies, providing detailed analysis and directions for further assessment in the case.

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