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SC questions F1 tax waiver

New Delhi, Oct. 18: The Supreme Court has asked the Uttar Pradesh government to explain why entertainment tax was waived for the Formula One event scheduled to kick off in Greater Noida later this month.

The court also issued notices to Jaypee Sports International Limited, the organisers, following a petition, which said F1 racing was an “elitist (and) dangerous sport” that served no public interest and, therefore, didn’t deserve a tax exemption.

A bench, headed by Justice D.K. Jain, also sent notices to the commissioner, entertainment taxes, Uttar Pradesh; the special secretary in the state’s tax department, and the Yamuna Expressway Industrial Development Authority.

The petitioner, Amit Kumar, claimed Formula One races had “no connection with the general populace at the grassroots level”.

It “panders to the tastes of the very rich and the social and financial elite and therefore the grant of exemption from the payment of entertainment tax was not warranted…” his petition said.

On May 31 this year, Jaypee Sports had sought an exemption on the ground that it had spent Rs 176.91 crore on the construction of the track.

The waiver came on June 6, 2011, two years after the state government had in May 2009 drawn up, through the industrial development department, a policy of granting tax, fee and levy exemptions to reduce the impact of the economic downturn.

Kumar’s petition said such exemptions, at a huge cost to the exchequer, would not in any way raise the popularity of the sport among the masses. “(The) private respondent, Jaypee Sports International Ltd, will just make a killing from the event and nothing will be heard of the matter again,” it said.

The petition also alleged that the exemption had been granted as the company was close to the political leadership in the state and cited earlier instances when courts had frowned upon such waivers in case of IPL cricket matches.

Apart from the tax waiver, Jaypee Sports, the petition added, was not paying a penny for the services of civic and police personnel during the event.

The petition also pointed out that the event was being encouraged by Uttar Pradesh, one of the more backward states in the country.

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