Anil Ambani, the chairman of Reliance Group. Photo: AFP / The Times of India

Indian authorities have denied that a political deal was struck for France to waive €143.7 million (US$162.6 million) of tax liabilities owed by businessman Anil Ambani shortly after Delhi agreed to buy 36 Rafale jets from the French.

French newspaper Le Monde reported on Saturday that the tax accord was agreed with Reliance Atlantic Flag France, the French subsidiary of Reliance Group, and a partner in the US$8.7 billion Rafale fighters purchase, just months after the jets deal was announced in 2015. 

However, the Indian Ministry of Defense said the tax matter and the jets procurement were two separate issues.

“Neither the period of the tax concession nor the subject matter of the concession relate even remotely to the Rafale procurement concluded during the tenure of the present government,” it said in a statement. “Any connections drawn between the tax issue and the Rafale matter is totally inaccurate, tendentious and is a mischievous attempt to disinform.”

France’s ambassador to India, Alexandre Ziegler, said on Twitter that the tax deal only concerned Reliance.

“This settlement was conducted in full adherence with the legislative and regulatory framework governing this common practice of the tax administration,” he said. “It was not subject to any political interference whatsoever.”

In a separate tweet, Ziegler said reliance had settled a tax dispute dating back to the period of 2008-2012.

India Today said that Reliance had been found liable for tax payments of €60 million(US$67.8 million) for the period of 2007-2010 and made an offer of €7.6 million ($8.6 million) that was refused. Instead, French conducted another investigation and asked for an additional €91 million ($102.9 million), taking the total to €151 million ($170.8 million).

However, France eventually agreed to accept a settlement of just €7.3 million ($8.2 million) from Reliance, sparking claims of a political link with the Rafale deal that have been exploited by opposition parties as India goes to the polls. Reliance dismissed the report by Le Monde.

Four years of controversy

“Reliance denies any favoritism or gain from the settlement,” the company said in a statement. “Reliance Flag settled tax disputes as per legal framework in France available to all companies operating in France.”

It added: “During the period under consideration by the French tax authorities — 2008 to 2012 — i.e. nearly 10 years ago, Reliance Atlantic Flag France had an operating loss of Rs20 crore ($3 million). The French tax authorities had raised a tax demand of over Rs1,100 crore for the same period. As per the French tax settlement process and law, a mutual settlement agreement was signed to pay Rs 56 crore as a final settlement.”

The Rafale procurement has been mired in controversy since it was confirmed by Prime Minister Narendra Modi during a Paris visit in April 2015. India and France signed an agreement in September 2016 which mandated that 50% of the work would be handled by French partners. Dassault Aviation, the manufacturer of Rafale jets, chose Reliance as an offset partner despite its lack of experience, sparking claims of corruption by the opposition Congress party.

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