The bench comprising Justices AR Dave and AK Goel agreed to examine the issue at length on Wednesday after a short hearing. The state was represented by Hemantika Wahi and Jesal Wahi, while the film maker was represented by Anand Grover.
The top court had previously declared homosexuality, except between consenting adults and in private, illegal. A plea for a review of that controversial 2013 ruling, which was criticized at home and abroad, is pending.
The top court had earlier stayed the Gujarat high court ruling that had granted a tax exemption to the Gujarati movie.
Under state policy, movies cannot be granted the relief if they propagate a social evil or are against national unity.
Film-maker Kiran Kumar Rameshbhai Devmani twice sought the exemption and was denied. He then moved the high court, which ruled in February last year that it could be granted the exemption and asked the state government to extend the support to it.
The state contended that the movie Meghdhanushya (Rainbow) could not be granted the tax exemption as it came within the pale of the "social evil" exception.
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