UEFA said last month that AC Milan did not meet a break-even requirement under its Financial Fair Play regulations, adding the club had not provided sufficient evidence of its financial stability.
Since then, U.S. hedge fund Elliott Management has taken control of the indebted soccer club from Chinese businessman Li Yonghong and promised to inject 50 million euros (44.62 million pounds) to help stabilise its finances.
Elliott welcomed the decision as "an important first step" in the relaunching of the club.
"This rehabilitation will not be an overnight project, and there is a great deal of hard work ahead which Elliott is ready for," a spokeswoman said.
Li bought the Serie A club last year from former Italian prime minister Silvio Berlusconi with the help of Elliott, but then failed to repay the fund.
In a statement, the court said that UEFA was not able to consider some important elements at the time of its decision, "in particular that the current financial situation of the club was now better, following the recent change in the club's ownership".
It referred the case back to UEFA to "issue a new proportionate disciplinary measure on the basis of the current financial situation of the club".
Under UEFA regulations, any football club spending more than its generated revenue faces possible sanctions, including, in certain circumstances, a ban from playing in competitions run by European soccer's governing body.
Li had long been looking for new investors to share the financial burden of the loss-making club, which, according to a source, is expected to have closed the financial year to the end of June with a loss of 75 million euros.
Separately on Friday, Milan prosecutors have put Li under investigation for alleged false accounting, two sources with knowledge of the matter said.
The probe regards information the soccer club had issued regarding the state of Li's finances, one of the sources said.
A third source added that the investigation had been prompted by prosecutors coming into possession of a sentence by a Chinese court that certified a company owned by Li going bankrupt.
Italian tax police also asked the Serie A club and banks, auditors and consulting firms, who played a role in verifying Li's financial health for documents regarding the acquisition of Milan, that same source said.
These included Ernst&Young, Deloitte, Rothschild and BNP Paribas, who had no immediate comment.
Li could not be reached for comment.
(Additional reporting by Paola Arosio and Massimo Gaia, writing by Agnieszka Flak, editing by Larry King and Christian Radnedge)
