I often see sentences like
nel ringraziarla, le porgo i miei più cordiali saluti
capitalized as follows
nel ringraziarLa, Le porgo i miei più cordiali saluti
Some people claim the latter to be more formal, some others argue that it's wrong and a misuse of capitalization.
Which one is preferable and/or more correct?
Capitalizing the pronoun when it is referring to the person/people to whom a communication is directed is normally used in commercial/business communications. Capitalizing it would mean to consider the receiver of the communication important.
Nowadays, it is less and less used; somebody could also find it affected. Eventually, the communication can start with Gentile Cliente, but then the pronoun or the possessive is written normally as any other word (which means it is capitalized only at the beginning of a sentence.)
In any case, it is not a matter of grammar; It just a way to convey a meaning ("you, the listener, are important for us") that otherwise would require using adjectives (e.g. stimato).
The second phrase is more formal and slightly antique (antique not in a sense of "archaic" but just as an older and established version). It is the only style in which any bureaucratic correspondence or commercial letters should be written.
The rules require using capitalization of the pronouns a) to distinguish between a correspondent, addressed in a polite way, and any other (third) person, and b) to show more respect to the correspondent (as it is the case in some other languages, e.g., in German, Danish, Russian, and partially Swedish). But it has become more and more common recently to avoid capitalization, just to simplify correspondence and reading and to shift the writer's attention from the appropriate grammar use to the meaning of what's being said.
