A decision on the proposal was deferred by councillors last month after Duddingston House Properties wrote to the council to complain about what it said were errors in the papers submitted to the development management sub-committee.
The firm also objected to the resubmission of a report from 2008 requesting planning permission for the plan. DHP said it had been granted planning permission at the time, subject to conditions which have now been fulfilled - but the council says the permission was never finally granted, and it is within its right to consider the matter anew.
After seeking legal advice, the council's monitoring officer, who is responsible for making sure the council acts lawfully, has decided that the documents are satisfactory, and the concerns raised by DHP will be addressed only in an addendum to the reports when they go back before planners on June 8.
A council spokesman said: "This application was continued by the committee on May 11, 2011 to allow the council's monitoring officer to respond to the applicant's concerns about the head of planning's report. The monitoring officer has confirmed that the report is satisfactory and has recommended that the applicant's points are addressed in an addendum to the report."
The news was welcomed by protesters who have campaigned against the plan, which would see the art deco auditorium demolished and replaced by a new building, with the front parts of the building preserved and converted into a hotel.
Chair of Southside Community Council, Hilary McDowell, said: "I am pleased that the application will go back to the planning committee.
"The committee will be able to decide on the fate of this listed building using the SHEP (Scottish Historic Environment Policy] test criterion and all the comments and objections from all the heritage groups, many politicians and hundreds of members of the public. There is a future for this building possible that will serve the needs and wants of the community. A refurbished cinema/multi-purpose arts venue will bring life and vibrancy into the area and could help to regenerate it. That is the wish of the local community."
A spokesman for DHP said the firm was glad the council had agreed to include the addendum when the reports are resubmitted. "We are pleased to note that the monitoring officer agreed with our assertion that it was essential that committee members have all pertinent facts before them in coming to a decision.
"He has asked the planning officials to produce a written update including information which was not in the original reports. We have written to the head of planning with further information which has come to our attention in the last two weeks and hope that this will be reflected in his updated report to the committee.
"It is still our view, and that of professionals advising us on legal, financial and planning matters, that there are no credible, realistic or viable bids for the building."