Fruit old s.a.s was active in wholesale of fruit and vegetables. In 2003 it purchased products at a price higher than the market price from another company owned by the same partners, Fruit new s.r.l., and resold them at a price lower than the purchase price. Both companies were domiciled in Italy.
Following these transactions the entire business of Fruit old s.a.s (premises, employees and customers) was transferred to Fruit new s.r.l.
The tax authorities issued an assessment where the price of the transactions had been adjusted, since it was in the taxpayer’s interest to transfer income from the Fruit old s.a.s to Fruit new s.r.l.
The company argued that the transactions in question only took place over a short period of three months. It also stated that the pricing of the transactions were motivated by an “intra-group strategy”.
Lower courts had ruled in favour of the company and set aside the assessment of the tax authorities.
Judgement of the Court
The Supreme Court upheld the judgement of the lower court and dismissed the appeal of the tax authorities.
Since this was a case involving two Italien companies, the rules set forth in Article 110, on international transfer prices could not be applied.
Transactions between resident intra-group companies at a price different from the normal value determined pursuant to Article 9 of the Income Tax Act are not in it self indicative of an avoidance conduct.
ITA SC 2021