This case concerns Società Italiana per l’Oleodotto Transalpino Spa (S.I.O.T.) – , which operates the transalpine oil pipeline that crosses Italy, Austria and Germany, with the Austrian subsidiary T.O.O. GmbH and with the German subsidiary D.T.O. GmbH, belonging to the same group of companies. The Italian tax authorities had issued four notices of assessment for FY 2003-2006, related to undeclared revenues, determined in application of the transfer pricing regulations, according to which revenues deriving from transactions with foreign companies must be determined according to the “normal value” of the goods sold or services provided, cf, the arm’s length principle. S.I.O.T. had allocated profit from the activity between the Italien, Austrian and German pipelines using the profit split method – where kilometers of pipeline was the splitting factor. However, the cost of maintenance borne of S.I.O.T. was almost three times higher than that of the other two companies managing the pipeline due to the geography. The tax authorities therefore adjusted the profit allocation by referring to two other significant parameters (in addition to those already considered by the company), i.e. that of the electricity used and that of the maintenance costs borne by the individual companies, except then, in practice, to choose and use only one (that of maintenance costs). Click here for Translation ...