SC wants separate account for F1 entertainment tax

Posted on    22 October 2011

Jaypee Sports International Ltd, organizer of India’s first Formula One (F1) Grand Prix, was directed by the Supreme Court on Friday to deposit 25% of ticket sale receipts in a separate account.


The court passed the interim order in response to a public interest litigation, which claimed that the Uttar Pradesh government had wrongly granted the event an exemption from entertainment tax.


As a temporary measure, Jaypee will have to deposit approximately Rs.18 crore in a non-lien account within two weeks of the race, which is scheduled to be held during 28-30 October.


A bench comprising justices D.K. Jain and Anil Dave will decide the case later. It directed the Uttar Pradesh government to respond in the first week of November.


Earlier this week, the court had issued notices seeking responses from the Uttar Pradesh government and Jaypee on why the exemption was granted.


Jaypee’s counsel Mukul Rohatgi said the company had spent more thanRs.2,000 crore on the project. He said the company had undertaken the venture after being allotted 1,000 hectares in June 2008 under a special government policy that sought to develop the area. Sports is included as a category for development of the area, according to the policy, he argued.


Rohatgi said tickets were sold out and patrons from across the world were expected to attend the event.


He said the interim order was not necessary as the company was “good for its money” and there was no scope of recovering the amount from spectators now since ticket sales were over.


The court also asked whether F1 racing came under the definition of sports under the Uttar Pradesh government’s land allotment policy, a contention that may surface at the later hearings.


Nikhil Kanekal

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