Italy vs Montebianco S.p.A., June 2026, Supreme Court, Case No 18145/2026
Table of Contents
Case Information
Court: Corte di Cassazione, Civile, Sezione 5
Case number: 18145/2026
Citation: Civile Ord. Sez. 5 Num. 18145 Anno 2026
Applicant: Montebianco s.p.a.
Respondent: Agenzia delle Entrate
Jurisdiction: Italy
Judgment date: 05/06/2026
Judgment Summary
Montebianco s.p.a. challenged two assessment notices (nos. T930ETA01573/2015 and T9303TA01575/2015) and a penalty act (no. T93COTA00892) by which the tax authority had redetermined the company's income for IRES and IRAP purposes. The two disputed items were: (i) unrecorded positive components arising from intra-group transactions, and (ii) failure to apply withholding tax on a prize operation, specifically a tourist trip to Egypt offered to customers who committed to reach certain purchase volumes.
The Commissione tributaria provinciale (CTP) of Varese had joined the proceedings and allowed both appeals. The Commissione tributaria regionale (CTR) of Lombardia, in judgment no. 5074/2017 deposited on 5 December 2017, partially reversed that decision: it upheld the CTP on the transfer pricing issue but reversed it on the prize operation issue, finding a clear link between the achievement of a turnover target and the free provision of the trip.
Montebianco brought a cassation appeal on two grounds. The Agenzia delle Entrate cross-appealed on three grounds. The Deputy Prosecutor General, Mauro Vitiello, filed written submissions requesting that the second ground of the main appeal be allowed and that the cross-appeal be rejected.
The Supreme Court declared the first ground of the main appeal inadmissible, allowed the second ground, and rejected the first and second grounds of the cross-appeal, absorbing the third. It quashed the CTR judgment in the part affected by the allowed ground and remitted the case to the Corte di giustizia tributaria di secondo grado della Lombardia, in a different composition, including for determination of the costs of the cassation proceedings.
Background
Montebianco s.p.a. organised a tourist trip to Egypt for customers who undertook to place orders within a specified period (1 January to 31 March 2011). Customers who did not place the required orders were obliged to reimburse the cost of the trip, fixed at a lump sum of €2,000.00.
The tax authority issued assessment notices redetermining the company's IRES and IRAP income. Two distinct grounds of assessment were raised: unrecorded positive components from intra-group transactions (the transfer pricing issue), and failure to apply withholding tax on what the authority characterised as a prize operation under art. 30, comma 1, d.p.r. n. 600/1973 and art. 19, comma 8, l. n. 449/1997.
The CTP of Varese allowed both appeals. The CTR of Lombardia reversed on the prize operation issue, finding it evident that there was a link between achieving the turnover target and the free provision of the trip, and that it was irrelevant that the prize was provided before the condition was fulfilled, given the customer's obligation to reimburse the cost if orders were not placed. On the transfer pricing issue, the CTR confirmed the first-instance judgment, endorsing the use of the cost plus mark-up method and noting that the US subsidiary Montebianco USA bore significant personnel costs that were not borne by the parent company on other markets.
Core Dispute
The first dispute concerned whether the tourist trip offered to customers constituted a taxable prize operation subject to withholding tax under the applicable provisions, or whether it was instead a contractual term in a bilateral sale and purchase agreement, outside the scope of prize operation rules.
The second dispute concerned the transfer pricing methodology used to assess intra-group transactions between Montebianco s.p.a. and its subsidiaries, in particular whether the cost plus mark-up method was appropriately applied and whether the company had discharged its burden of proof in demonstrating that the transactions corresponded to the normal value under art. 9 TUIR and art. 110, comma 7, d.p.r. n. 917/1986.
Court Findings
On the first ground of the main appeal (omitted ruling on admissibility of the appeal below), the court held it inadmissible. The defect of omitted ruling is only available in respect of substantive claims or defences, not purely procedural questions, citing Cass. n. 26913/2024. The court also noted that, in any event, under the tax litigation specific requirement in art. 53 d.lgs. n. 546/1992, the tax authority's repetition of arguments already advanced at first instance suffices to satisfy the duty of specific grounds of appeal, citing Cass. n. 25191/2024.
On the second ground of the main appeal (the prize operation issue), the court held the ground well founded. It adopted the reasoning of the Deputy Prosecutor General and held that the arrangement could not be classified as a prize operation because a relationship of reciprocal obligations (sinallagmaticità) existed between the provision of the trip and the payment for goods that the customer committed to purchase from Montebianco, or alternatively the payment of €2,000.00 as a lump-sum contribution to the cost of the trip. The trip was not offered to an indeterminate group of persons but was a term in individual bilateral contracts. The court cited Cass. n. 30840/2017, which held that promotional activities based on a contractual accessory clause, rather than a promise to the public under art. 3, comma 1, d.P.R. n. 430/2001, cannot be classified as prize operations and fall outside the relevant tax regime.
On the first ground of the cross-appeal (alleged inadequate reasoning on the transfer pricing point), the court rejected it, finding the CTR's reasoning above the constitutional minimum required, in that it identified the justification for applying the cost plus mark-up method as adapted to the specific circumstances, including the personnel cost burden borne by the US subsidiary.
On the second ground of the cross-appeal (alleged violation of art. 110, comma 7, TUIR and art. 2697 c.c. on burden of proof), the court rejected it. It held that use of a method other than the CUP (Comparable Uncontrolled Price) does not by itself constitute a violation of art. 110, comma 7, TUIR. The court noted that the OECD Guidelines had evolved: the original 1995 guidelines treated CUP as the preferred method, but the 2010 guidelines removed any hierarchy, though an implicit preference for CUP remains requiring specific justification when another method is chosen. The court also noted that art. 4, comma 3, of the D.M. 14 maggio 2018 expressly provides a preference for traditional methods and in particular the CUP where practicable. The court found that the lower court had validly accepted the company's evidence that its intra-group transactions corresponded to normal value using the cost plus method, and that there was accordingly no breach of art. 2697 c.c. It quoted at length from Cass. n. 15101/2025 on the conditions for valid use of the cost plus method.
The third ground of the cross-appeal (failure to apply the substitute tax under art. 19, comma 8, l. n. 449/1997 and art. 19, comma 2, d.p.r. n. 633/1972) was absorbed by the allowance of the second ground of the main appeal, which excluded the arrangement from the prize operation regime.
Outcome
The Supreme Court declared the first ground of the main appeal inadmissible and allowed the second ground. It rejected the first and second grounds of the cross-appeal and absorbed the third ground. The CTR judgment was quashed in the part relating to the allowed ground (the prize operation and withholding tax issue). The case was remitted to the Corte di giustizia tributaria di secondo grado della Lombardia, in a different composition, also for determination of the costs of the cassation proceedings.
TP Method Highlighted
The transfer pricing methodology at issue was the cost plus mark-up method, applied by Montebianco s.p.a. to its intra-group transactions. The tax authority had favoured use of the CUP method. The CTR had upheld the cost plus method on the basis that the US subsidiary Montebianco USA bore significant personnel costs that the parent company Montebianco s.p.a. bore itself on other markets, making adaptation of the method appropriate to the specific circumstances.
The Supreme Court confirmed that the cost plus method is a recognised OECD method and that use of a method other than CUP does not violate art. 110, comma 7, d.p.r. n. 917/1986. The court noted the evolution from the 1995 OECD Guidelines, which gave CUP priority, to the 2010 OECD Guidelines, which removed formal hierarchy, and referenced the D.M. 14 maggio 2018, which reintroduced an express preference for traditional methods including CUP where practicable. The court found the cost plus method had been appropriately applied and that the company had discharged its burden of proving that the transactions fell within the normal value under art. 9 TUIR.
Major Issues / Areas of Contention
- Whether the tourist trip to Egypt offered to customers who committed to purchase volumes constituted a prize operation subject to withholding tax under art. 30, comma 1, d.p.r. n. 600/1973 and art. 19, comma 8, l. n. 449/1997, or a contractual term in a bilateral sale and purchase agreement outside that regime.
- Whether the CTR's judgment on the transfer pricing issue was vitiated by inadequate or merely apparent reasoning within the meaning of art. 36, comma 2, n. 4 and art. 61 d.lgs. n. 546/1992, art. 132, comma 2, n. 4 c.p.c. and art. 111, comma 6, Cost.
- Whether use of the cost plus mark-up method rather than the CUP method violated art. 110, comma 7, d.p.r. n. 917/1986 (TUIR) and whether the company had discharged its burden of proof under art. 2697 c.c. in demonstrating that intra-group transactions corresponded to normal value.
- Whether the first ground of the main appeal, alleging that the CTR had omitted to rule on the inadmissibility of the tax authority's appeal for lack of specific grounds, disclosed a cognisable defect of omitted ruling under art. 360, n. 4, c.p.c.