The agency had argued that the word "Prins", the Swedish word for Prince, is a professional title used by the Swedish royal family and that there was a risk that the name would lead to misunderstandings.
But the Jönköping court of appeal (Kammarrätten) has rejected the line of argument and allowed a couple in Västervik in southern Sweden to proceed with the naming of their son.
The court ruled that the title "Prins" "can not be equated with accepted professional titles within society."
The court based its decision on the fact that the tax agency had previously approved the name as an acceptable Christian name and despite the adoption of new guidelines regarding titles such as doctor, advocate, engineer and captain, the Västervik couple should also be allowed to give their son the name.
The tax agency retains the right of approval for the naming of children in Sweden and all parents are required to register the names of their new born with the agency within three months of birth.
According to the tax agency website: "A first name may not be such that it can be seen as offensive or cause discomfort to the child. Neither may it resemble a surname."
The Local has previously reported on disputes surrounding names such as Metallica, Google, Dark Knight and Elvis.