Italy vs GE Medical Systems Italia S.p.A. (Nuovo Pignone Holding S.p.A.), March 2026, Supreme Court, Cases No 7169/2026 and 7163/2026
Table of Contents
Case Information
Court: Corte Suprema di Cassazione, Sezione Tributaria (Section 5)
Case number: Case No 7169/2026 (R.G. 25122/2020) and Case No 7163/2026 (R.G. 5878/2024)
Citation: Civile Sent. Sez. 5 Num. 7169 Anno 2026; Civile Sent. Sez. 5 Num. 7163 Anno 2026
Applicant: Agenzia delle Entrate (Italian Revenue Agency)
Respondent: Nuovo Pignone Holding S.p.A. (formerly GE Italia Holding S.p.A.) and GE Medical Systems Italia S.p.A.
Jurisdiction: Italy
Judgment date: 25 March 2026 (heard 3 March 2026)
Judgment Summary
These are two linked judgments of the Fifth (Tax) Section of the Italian Supreme Court of Cassation, both decided at the public hearing of 3 March 2026 and published on 25 March 2026. The President was Roberta Crucitti and the reporting judge was Danilo Chieca.
Case No 7169/2026 concerned the tax year 2011. The Agenzia delle Entrate appealed to the Supreme Court against judgment No 5556/2019 of the Commissione Tributaria Regionale (CTR) of Lombardy, deposited on 30 December 2019, which had dismissed the Agency's appeal and confirmed the annulment of the assessment notice by the Commissione Tributaria Provinciale (CTP) of Milan.
Case No 7163/2026 concerned tax years 2013, 2014 and 2015. The Agency appealed against judgment No 2550/2023 of the Corte di Giustizia Tributaria (CGT) di secondo grado of Lombardy, deposited on 22 August 2023, which had likewise dismissed the Agency's consolidated appeals and confirmed the first-instance annulments.
In both cases the Supreme Court declared the dispute moot on the goodwill amortisation grounds following the Agency's own self-remedy annulments made pending the cassation proceedings, and rejected the remaining transfer pricing grounds of appeal. The Agency was ordered to pay costs in both cases.
Background
GE Medical Systems Italia S.p.A. was fiscally resident in France and belonged to the General Electric (GE) multinational group. It carried on the sale and installation of diagnostic medical equipment and the provision of technical assistance and maintenance services, principally to hospitals and private clinics in Italy. It was wholly controlled by GE Medical Systems Information Technologies S.r.l., which was in turn controlled by Nuovo Pignone Holding S.p.A. (formerly GE Italia Holding S.p.A.).
Both companies participated in the Italian domestic tax consolidation regime: GE Medical Systems Italia S.p.A. as the consolidated entity and Nuovo Pignone Holding S.p.A. as the consolidating parent, filing a consolidated return under Art. 122 of the t.u.i.r.
In 2001, the French company GE Medical Systems S.A. had incorporated GE Medical Systems Italia Holding S.r.l. and contributed to it its 100 per cent shareholding in GE Medical Systems Italia S.p.A. That controlling shareholding was recorded in the balance sheet of the transferee as a financial fixed asset. In 2003, GE Medical Systems Italia Holding S.r.l. absorbed GE Medical Systems Italia S.p.A. by merger and adopted the latter's name. The merger produced a deficit arising from the cancellation of the controlling shareholding held by the absorbing company in the absorbed company. The new GE Medical Systems Italia S.p.A. used the entire deficit to record an increased goodwill value of the same amount as a fixed asset, to be amortised over ten years from 2003 to 2012 at one tenth per year.
GE Medical Systems S.A. had previously applied the 19 per cent substitutive tax under Art. 1 of Legislative Decree No 358 of 1997 to the capital gain realised on the transfer of the controlling shareholding. The post-merger company took the view that it could, under Art. 6, paragraph 2, letter a) of the same decree, obtain free tax step-up of the goodwill recorded in the balance sheet by using the merger deficit up to the amount of that capital gain.
Core Dispute
Two separate sets of assessments are in issue across the two cases.
The first set concerns transfer pricing. In Case No 7169/2026, the Direzione Regionale della Lombardia conducted a tax audit of GE Medical Systems Italia S.p.A. in 2013 and issued an assessment for the year 2011. In Case No 7163/2026, a further audit was conducted in 2018 and assessments were issued for 2013, 2014 and 2015, covering both IRES (corporate tax) and IRAP (regional production tax). In both cases the Agency contested, under Art. 110, paragraph 7 of the t.u.i.r., the purchase of medical equipment from foreign affiliates, specifically the French company GE Medical Systems CS and the American GE Company (Case No 7169/2026), at prices above the normal value. The Agency's transfer pricing analysis was based on a sample of nine comparable companies selected from two hundred initially examined.
The second set concerns the deductibility of goodwill amortisation. The Agency contended that the French seller GE Medical Systems S.A., having no permanent establishment in Italy, should have taxed the capital gain as miscellaneous income under Art. 20, paragraph 1, letter f) of the t.u.i.r. (old text) at the 27 per cent substitutive tax rate under Art. 5, paragraph 1 of Legislative Decree No 461 of 1997, because the lower 19 per cent rate under Legislative Decree No 358 of 1997 was reserved for transfers of controlling shareholdings between entities resident in Italy and carrying on commercial activities. On this basis the Agency denied deductibility of the goodwill amortisation charges.
In Case No 7169/2026 the goodwill issue was the third and fourth grounds of cassation appeal. In Case No 7163/2026 it was the first and second grounds.
Court Findings
On the transfer pricing grounds (the first and second grounds in Case No 7169/2026, and the third ground in Case No 7163/2026), the Supreme Court first rejected the respondents' procedural objection of inadmissibility for failure to meet the requirement of Art. 366, paragraph 1, No 3 of the Code of Civil Procedure, holding that despite the reproduction of large extracts from the appeal pleadings, the salient aspects of the proceedings and the criticisms of the lower court's judgment were immediately apparent without reference to external sources.
On the substance, in Case No 7169/2026, the first ground alleged nullity of the CTR judgment for absolute absence or mere appearance of reasoning under Art. 36, paragraph 2, No 4 of Legislative Decree No 546 of 1992. The court held this ground to be without merit. It recalled the settled principle, following the reformulation of Art. 360, paragraph 1, No 5 of the Code of Civil Procedure by Art. 54, paragraph 1, letter b) of Decree-Law No 83 of 2012 (converted by Law No 134 of 2012), that review of the reasoning of a judgment is now confined to verifying compliance with the constitutional minimum required by Art. 111, sixth paragraph of the Constitution. That minimum is breached only in cases of absolute absence of reasons on a material and graphic level, irreconcilable contradiction between incompatible statements, or perplexed, incomprehensible or apparent reasoning; a mere insufficiency of reasoning is irrelevant. The court further noted that under the principle affirmed by the Joint Sections in judgment No 642/2015, a decision that reproduces the content of a party's pleading without adding anything is not null, provided the reasoning is clearly, unambiguously and exhaustively attributable to the deciding court.
The CTR had summarised the Agency's grounds of appeal on the transfer pricing issue, had shown that it understood their scope, and had given a reasoned response based on three critical points raised by the taxpayers: the comparison period used (a different tax year from the one under assessment); the comparables selected (four of the nine companies used performed activities beyond the commercialisation of medical equipment); and the reduction in the profitability margin in 2011, which the taxpayers attributed to sector-wide economic reasons evidenced by the Ministry of Health's 2011 health expenditure report. The court held that this reasoning was intelligible and sufficient to identify the basis of the CTR's conclusion, namely that the Agency had not proved that the transfer prices used in intra-group transactions by GE Medical Systems Italia S.p.A. departed from the normal value under Art. 9, paragraph 3 of the t.u.i.r.
The second ground in Case No 7169/2026 alleged omitted examination of decisive and contested facts under Art. 360, paragraph 1, No 5 of the Code of Civil Procedure. The court held the ground admissible, finding that the double-conformity bar under Art. 348-ter, fourth and fifth paragraphs of the Code of Civil Procedure did not apply because the CTP judgment had not expressly ruled on the Agency's transfer pricing ground of appeal, confining itself to reproducing the taxpayers' submissions in the narrative section. On the merits, however, the court rejected the ground. It held that the CTR had not overlooked the facts in question but had given them a different reading from that advanced by the Agency, based on an overall assessment of the procedural evidence, which is not subject to review on a point of law. The court further recalled the settled principle that the defect of omitted examination does not arise if the court has in any event considered the relevant historical fact, even if not all the probative results have been individually assessed by it.
In Case No 7163/2026, the third ground raised the same nullity-of-reasoning objection in relation to the CGT judgment on the transfer pricing issue for the years 2013, 2014 and 2015. The court rejected it for the same reasons. The CGT had identified specific criticisms of the Agency's analysis: the use of the Aida database (updated to 2018) rather than Amadeus or Orbis for years prior to 2018; the use of the Aida database updated to 2018 for earlier tax years; the selection of Italian companies performing activities beyond medical equipment commercialisation; the explanation of reduced margins by reference to contraction in health expenditure; and the Agency's unexplained preference for the Italian rather than the European and in particular French market, given the French origin of the goods resold by GE Medical Systems Italia S.p.A. and the definition of normal value under Art. 9, paragraph 3 of the t.u.i.r. The court held this reasoning to be clear and intelligible.
On the goodwill amortisation grounds, in Case No 7169/2026 the third and fourth grounds were declared moot following the Agency's self-remedy annulment of the relevant part of the assessment, effected by the Direzione Regionale della Lombardia pending the cassation proceedings. The same declaration was made for the first and second grounds in Case No 7163/2026. The court noted that such documents may be lodged under Art. 372, second paragraph of the Code of Civil Procedure as they relate to a supervening cause of partial inadmissibility of the appeal.
Outcome
Case No 7169/2026: The Supreme Court declared the dispute moot on the third and fourth grounds of appeal (goodwill amortisation issue), following the self-remedy annulment by the Agency. It rejected the first and second grounds (transfer pricing issue). The Agency was ordered to pay the respondents' costs of the cassation proceedings, quantified at a total of 25,200 euro (of which 200 for disbursements), plus a 15 per cent flat-rate reimbursement and statutory accessories. No contribution certificate under Art. 13, paragraph 1-quater of Presidential Decree No 115 of 2002 was issued.
Case No 7163/2026: The Supreme Court declared the dispute moot on the first and second grounds of appeal (goodwill amortisation issue), following the self-remedy annulments. It rejected the third ground (transfer pricing issue). The Agency was ordered to pay the respondents' costs, quantified at a total of 30,200 euro (of which 200 for disbursements), plus a 15 per cent flat-rate reimbursement and statutory accessories. No contribution certificate was issued.
In both cases the court noted that the Agency was to be treated as the losing party, both in respect of the remaining disputed matter and on an overall assessment of the outcome of the litigation, given the greater value of the tax assessments not annulled by the Agency itself.
TP Method Highlighted
The Agency's transfer pricing analysis in both cases used the net margin method (referred to in Case No 7169/2026 as the "metodo del margine netto"), applying a sample of nine comparable companies selected from two hundred initially examined. In Case No 7163/2026 the Agency used the Aida database updated to 2018. The relevant statutory provision was Art. 110, paragraph 7 of the t.u.i.r., and the normal value benchmark was Art. 9, paragraph 3 of the t.u.i.r. The taxpayer's own transfer pricing study used different comparables and, in Case No 7163/2026, different databases (Amadeus and Orbis).
Major Issues / Areas of Contention
- Whether the Agency's transfer pricing analysis for the year 2011 (Case No 7169/2026) correctly identified the comparison period, selected appropriate comparable companies and attributed the reduction in GE Medical Systems Italia S.p.A.'s profitability margin from approximately 10 per cent to 3.23 per cent to non-arm's-length intra-group pricing rather than sector-wide economic factors.
- Whether the Agency's transfer pricing analysis for the years 2013, 2014 and 2015 (Case No 7163/2026) was vitiated by the use of the Aida database updated to 2018 for earlier years, the selection of Italian comparables performing activities beyond medical equipment commercialisation, and the preference for the Italian rather than the European or French market as the reference market under Art. 9, paragraph 3 of the t.u.i.r.
- Whether the lower court judgments on the transfer pricing issues were null for absolute absence or mere appearance of reasoning under Art. 36, paragraph 2, No 4 of Legislative Decree No 546 of 1992, as alleged by the Agency.
- Whether the CTR judgment in Case No 7169/2026 had omitted to examine decisive and contested facts concerning the Agency's transfer pricing analysis, including the construction of the profitability benchmark using 2011 data and the alleged heterogeneity of the taxpayer's own comparable sample.
- Whether GE Medical Systems S.A., as a French resident company without a permanent establishment in Italy, was entitled to apply the 19 per cent substitutive tax rate under Art. 1 of Legislative Decree No 358 of 1997 to the capital gain on the transfer of its controlling shareholding, or was instead subject to the 27 per cent rate under Art. 5, paragraph 1 of Legislative Decree No 461 of 1997 (this issue was rendered moot in both cases by the Agency's self-remedy annulments).
- Whether the principle of legitimate expectation (tutela dell'affidamento) under Art. 10, paragraph 2 of Law No 212 of 2000 precluded the assessment for 2011 given that the audit commenced after the period for assessing year 2003 (when the merger deficit was allocated to goodwill) had expired and no adjustment had been made for the first available year (this issue was also rendered moot by the self-remedy annulment in Case No 7169/2026).
- Whether, in Case No 7163/2026, the CGT correctly applied the doctrine of external res judicata on the basis of the Supreme Court order No 18239/2021 of 24 June 2021 and CTR Lombardy judgment No 1719/8/2018 of 17 April 2018, both of which had recognised the deductibility of the goodwill amortisation charges (this issue was rendered moot by the self-remedy annulment).