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UP government withdraws entertainment tax exemption to F1
October, 23rd 2013

Four days before the third edition of India's F1 race gets rolling at the Buddh International Circuit (BIC), the Uttar Pradesh government on Monday sought the Supreme Court's permission to withdraw its 2011 decision to grant entertainment tax exemption to Indian Grand Prix organizer Jaypee Sports International.

A bench headed by Justice R M Lodha told additional advocate general Ravi P Mehrotra that if the state wanted to withdraw its earlier decision, then it was free to do so. However, it issued notice to Jaypee Sports on UP's application accusing it of not declaring the income from the F1 race honestly.

The withdrawal of exemption will cost Jaypee Rs 25 crore.

Just days before the first F1 race could take place in 2011, a writ petition was filed in the apex court challenging the state's decision to exempt the event from entertainment tax.

The court had on October 21, 2011 directed Jaypee Sports to "deposit in a 'no lien account' the amount of entertainment tax without taking into consideration the exemption notification". It had ordered that entertainment tax due to the state under UP Entertainment and Betting Tax Act, 1979, would be deposited in the 'no lien account' within two weeks of the event.

The UP government said for the first F1 event in 2011, Jaypee Sports deposited Rs 24.59 crore in the no lien account claiming that it had a total collection of Rs 122.97 crore. The state said the actual collection was Rs 147.96 crore with an entertainment tax liability of Rs 36.99 crore.

"Jaypee Sports had held F1 race on two occasions from October 28 to October 30 in 2011 and from October 26 to October 28 in 2012, yet the shortfall amount of Rs 12.39 crore has not yet been deposited as per the apex court's October 21, 2011 order," the state said.

In addition, the organizers have not give the district administration details of ticket sales and revenue earned in 2012 for the purpose of calculating entertainment tax. The managing director of Jaypee Sports had informed the authorities that as per the SC order for 2011, the entertainment tax had been deposited in the 'no lien' account.

UP government said Jaypee Sports also maintained that the matter was listed before the apex court several times after October 21, 2011 and there had been no further direction for subsequent F1 races. Therefore, no further calculation or deposit as per the orders of the court was warranted, it had told the government.

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