A U-TURN was performed by Petersfield Town Council on Monday night after it awarded a grant to Petersfield Youth Theatre.
Originally the council refused an application from the youth theatre for £900 because it felt the application was poorly phrased.
The youth theatre said the grant was for partially funding the cost of hiring the Festival Hall for its production of
the Wizard of Oz, which was a financial success over Christmas.
However, the group also needed the money to help fund its autumn production Carmen, which was not as popular at the ticket office.
Jane Ace said: "Our artistic director may not have considered challenging our young people to perform in an opera for the autumn season, had he taken into account the need for a profit to be made.
"As it was, the youth theatre's production of Bizet's Carmen gave the performers the chance to explore the modern themes of violence and passion within the framework of a famous classical piece.
"It was artistically very successful, but was not so financially."
She added: "We are often told that PYT is one of the jewels in Petersfield's crown.
"Surely this should be recognised not just by the general public, but also by the elected members of the town council."
Cllr George Watkinson said: "We have no money left in the budget and I believe most strongly that it is not on to take that money away from other deserving people."
A decision was made at the end of the debate to take £600 away from brain injury charity Headway Portsmouth and South East Hants, to give to the youth theatre, along with £40 outstanding in the grant budget.