The Delhi government is offering a controversial entertainment tax waiver to the India Fashion Week, which will be held in the capital from April 27.

This is in spite of a case being heard in the Delhi high court in which the Fashion Development Council of India, the event organiser, has disputed a Rs 1 crore (Rs 10 million) tax demand.

The demand, and a showcause notice, was made by the state government after the 2002 event on the grounds that FDCI had not disclosed that IFW would be sponsored when it applied for a permission to hold the event.

The Delhi government charges a 20 per cent entertainment tax on total ticket receipts or the sponsorship amount, whichever is applicable.

FDCI had since applied for a tax waiver for the forthcoming event instead of merely a no-objection certificate.

The question of entertainment tax waivers for IFW has attracted controversy because it was requested on the assumption that the event would be city specific. Instead, IFW has alternated between Delhi and Mumbai.

Last year, for instance, Maharashtra offered IFW a waiver on 25 per cent entertainment tax after receiving assurances from FDCI that it would showcase Mumbai as a centre for fashion tourism in Asia. In spite of that, IFW shifted venue to Delhi.

In a faxed response to a questionnaire from Business Standard, FDCI has said that it will alternate the event between the two cities to raise awareness of fashion in India.

Senior Maharashtra government officials, however, say that the exemption was granted last year on the understanding that the event would continue in Mumbai.

A letter requesting a waiver addressed to Chief Minister Sushil Kumar Shinde said, "We believe that [the event] would help in developing the city as one of the destinations for fashion tourism in Asia. Worldwide, cities like London, New York, Paris...are associated with Fashion Weeks."

The letter adds that, "The exposure that Mumbai stands to get in the media as the fashion capital of India and raise tourist inflow to the city-based designer stores."