The Supreme Court on Tuesday issued notice to the Uttar Pradesh Government and the organiser of the Formula 1 Grand Prix of India – a Jaypee Group company -- on the state Government’s move to grant entertainment tax exemption to the company.
Acting on a Public Interest Litigation, the court asked the state Government and Jaypee Sports International Limited to reply by Friday regarding the racing event being granted entertainment tax exemption under the Uttar Pradesh Entertainments and Betting Tax Act, 1979.
The F1 is scheduled to be held in India for the first time on October 30 at Buddh International Circuit near Greater Noida in Uttar Pradesh.
According to the petitioner Mr Amit Kumar, F1 racing event is an elitist, exclusive and dangerous sport reserved for the very rich and the elite of society and did not deserve the entertainment tax waiver. Besides, the tax exemption is not going to lead to a mass-based popularising of the F1 but it will only help the company ‘make a killing’, the PIL said.
The PIL alleged that the waiver was granted because the private company is close to the Uttar Pradesh political leadership. It alleged that to give the exercise a measure of legitimacy, a policy was floated in the name of economic downturn to encourage developers and in this garb the benefit running into crores of rupees was given at the cost of the public exchequer and that of the taxpayers.
It said Jaypee Sports, when seeking tax relief, had informed the Yamuna Expressway Industrial Development Authority that it had invested Rs 777.04 crore from May 2009-10 for the Special Development Zone (SDZ). Of this, Rs 600.13 crore was towards the land cost and Rs 176.91 crores was spent for construction of F1 track and other expenditures.
The PIL also refers to communication from the Yamuna Expressway Industrial Development Authority to state that 351.12 hectares was used for sports core activity out of the total allotted land of 1000 hectares under the SDZ.
In a similar matter relating to the Indian Premier League (IPL), the petitioner said, the Madras High Court had held that it was not inclined to appreciate a tax exemption for IPL and had asked the Tax Department to look into the prospects of collecting entertainment tax for the conduct of IPL matches in the city.
The High Court had reasoned that revenues from such taxes could be used to implement welfare schemes, the petitioner said, adding that a direct parity can be drawn between the IPL and F1. Besides, the event does not even have mass support or popularity and therefore no entertainment tax exemption ought to have been given to the company, the PIL said.
Each ticket for the event reportedly costs between Rs 2,500 to Rs 35,000. The total seating capacity is around one lakh and if the tickets for the event are completely sold, the company would reportedly earn around Rs 90 crore.