Why should F1 get tax exemption? SC asks Jaypee

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SummaryThe Supreme Court on Monday sought a response from Jaypee Sports International (JSI), the organiser of the Formula 1 race in India

The Supreme Court on Monday sought a response from Jaypee Sports International (JSI), the organiser of the Formula 1 race in India, as to why the entertainment tax exemption granted by the Mayawati-led UP government should not be withdrawn in public interest.

The apex court is examining the validity of the waiver granted by the UP government under Section 11(1) of the UP Entertainments and Betting Tax Act, 1979. The country's third Formula 1 event is scheduled to be held in Greater Noida from October 25 to 27.

A bench headed by Justice RM Lodha sought the reply from JSI, Yamuna Expressway Industrial Development Authority, PIL petitioner Amit Kumar and others after the UP government sought permission to withdraw the exemption notification granted in June 2011 to the company.

The Akhilesh Yadav government argued that the company was not willing to deposit the balance amount of R12.39 crore towards the entertainment tax dues for the race held in 2011 in the ‘no lien account,’ as directed by the apex court, nor did it furnish details of sold tickets and passes issued for the 2012 race event for computation purposes.

Despite seeking information on ticket sales and revenue collection from the events for determination and deposit of entertainment tax for 2012, no action has yet been taken by the company, counsel Ravi P Mehrotra stated in a fresh application.

It further added that exemption from entertainment tax vide notification dated June 27, 2011 issued by the Industrial Development Department was to be valid only for one year.

Stating that the actual collection from the 2011 event was R147 crore as against the JSI's calculations of R123 crore, the counsel stated that there was a shortfall of R12.39 crore from the 2011 race as JSI has deposited only R24.59 crore.

The apex court in an interim order of October 2011 asked Jaypee to deposit 25% of sale proceeds from tickets for the 2011 event in a separate account. It had directed that the amount be kept in a “lien account”, which can't be operated by the organiser till the final disposal of the PIL challenging entertainment tax exemptions granted to the Jaypee group.

According to the UP government, the organiser is misinterpreting the exemption notification. Kumar had challenged the state government decision to grant exemption from payment of entertainment tax to Jaypee for organising the event.

According to PIL filed through counsel Prashant Kumar, the waiver has been granted purely due to the fact that the Jaypee group is close to the Mayawati government.

“Formula 1 racing is an elitist, exclusive and dangerous sport reserved for the very rich and the elite of society and did not deserve the waiving of entertainment tax,” he said, alleging that the policy, in the name of economic downturn and encouraging developers, was framed just to benefit the company, which did not have any mass support or popularity, and that too at the cost of the public exchequer.

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