india

Updated: Apr 13, 2019 23:42 IST

The defence ministry on Saturday denied any link between tax relief granted to Anil Ambani’s Reliance Flag Atlantic by France and the Rafale jet fighter deal after the French newspaper Le Monde reported that the tax relief was offered in 2015 soon after India agreed to purchase 36 of the warplanes built by Dassault Aviation in a₹59,000 crore transaction.

The Congress termed the tax waiver of 143.7 million euros a “quid pro quo” for India’s decision to buy the planes following the report, which came in the middle of general polls in which a controversy over the Rafale deal is one of the campaign 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,” the defence ministry 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.”

On Saturday, Le Monde reported that French tax authorities settled for 7.3 million euros from Reliance Flag Atlantic, a telecom company, against an original tax demand of 151 million euros months after Prime Minister Narendra Modi’s announcement that India would buy 36 Rafale fighters from France. The report added that French law enforcement agencies probed the company twice between 2007 and 2012 for suspected tax violations.

“A global settlement was reached between the French tax authorities and Reliance Flag,... in a dispute pertaining to the period 2008-2012,” French ambassador Alexander Ziegler tweeted. He added that the settlement was in “adherence with he legislative and regulatory framework” for tax issues and not “subject to any political interference”.

Reliance Flag Atlantic SAS, a subsidiary of Reliance Communications, in a statement said the tax issue was 10 years old and the tax demands that had been made on it were “completely unsustainable and illegal”. It also denied having received “any favouritism from the settlement.”

The Congress alleged that the reported tax waiver was due to the “blessings” of Prime Minister Narendra Modi who had acted as a “middleman” for the businessman. “This is called zero-sum choices, startling tax concession and Modi ‘Kripa’ (blessings),” said Congress’s chief spokesperson Randeep Singh Surjewala.

He claimed the “layers of crony capitalism” involving Modi and Ambani were now being unveiled. “PM Modi is acting as a middleman for Anil Ambani. How many other companies in France have got a tax benefit? Is this not a quid pro quo for the purchase of aircraft? It is clear only one watchman is the thief,” Surjewala said.

The NDA government’s decision to enter the government-to-government deal with France to buy 36 Rafale warplanes made by Dassault was announced in April 2015, with an agreement signed a little over a year later. This replaced the previous UPA regime’s decision to buy 126 Rafale jets, 108 of which were to be made in India by the state-owned Hindustan Aeronautics Ltd.

The deal has become controversial with the Opposition, led by the Congress, claiming that the price at which India is buying Rafale aircraft now is ₹1,670 crore for each, three times the ₹526 crore, the initial bid by the company when the UPA was trying to buy the aircraft. It has also claimed the previous deal included a technology transfer agreement with HAL.

The NDA has not disclosed details of the price, but the UPA deal, struck in 2012, was not a viable one, former defence minister Manohar Parrikar has previously said, implying that it would have never been closed and that, therefore, any comparison is moot. Indeed, the UPA was not able to close the deal until 2014, largely over discussions related to pricing of items not included in the initial bid.

The deal has also become controversial on account of the fact that one of the offset deals signed by Dassault is with Reliance Group of Anil Ambani. The Congress claims the earlier deal was scrapped and a new one signed just to provide Ambani this opportunity for an offset deal. Both the government and Reliance have repeatedly denied this.

The Supreme Court said in December it saw no need to order a court-monitored probe into the deal and that due process was followed in it. The Comptoller and Auditor General said earlier this year in a report that the price of the basic aircraft under the new deal was marginally lower than that under the old deal.

On Wednesday, The Supreme Court dismissed the government’s objections over the admissibility of leaked documents cited.