Reliance Communications denies France gave a waiver on unit's tax dues

RCom issued the denial after Le Monde newspaper reported that four years ago France dropped a demand for about $159 mn in taxes owed by Reliance's subsidiary in Europe

Reliance Communications Ltd. denied it received favorable treatment by France in settling a tax dispute while negotiating to become Dassault Aviation SA’s partner for a contract to sell fighter jets to India.

The Indian company, owned by former billionaire Anil Ambani, issued the denial after Le Monde newspaper reported that four years ago France dropped a demand for about $159 million in taxes owed by Reliance’s subsidiary in Europe.

The unit, Reliance Flag, “settled all disputes as per legal framework available to all companies in France,” a company spokesman said in a statement Saturday, denying any “favoritism or gain from the settlement.”

Indian Prime Minister Narendra Modi, facing voters in a contest for re-election, is under pressure amid allegations by opposition lawmakers that his government scrapped a 126-jet deal negotiated by the previous Congress-led administration, and acquired 36 fighter jets at a higher price. They also allege that the government forced Dassault to partner with Reliance for the additional investments necessary for India to award the purchase to the French firm. Ambani and the Modi government have denied all allegations of wrongdoing.

Aman Anand, a spokesperson for India’s defense ministry, said any connection drawn between the tax issue and the fighter-jet contract “is totally inaccurate, tendentious and is a mischievous attempt to disinform.”

According to Le Monde, which cited an auditor’s report from January 2015, Reliance Flag Atlantic France SAS saw two tax adjustments for the period between 2007 and 2012, which it contested. Tax authorities notably objected to the way the company accounted for purchases from other Reliance units, the newspaper said. The authorities finally reached a deal in 2015 that saw the company pay about 7 million euros ($7.9 million), instead of the 151 million euros they initially demanded, Le Monde said.

Reliance Flag owns a terrestrial cable network and other telecom infrastructure in France. Between 2008 and 2012, it made an operating loss of 200 million rupees, and the French tax authorities issued a demand of more than 11 billion rupees, the company said in the statement. A mutual settlement agreement was signed and the company paid 560 million rupees as per the French law, it said.

The French tax authorities declined to comment on the decision to waive the tax bill when contacted by Le Monde, the newspaper reported, adding Francois Hollande, who was French president at the time, was not aware of the matter.

A spokesman for France’s budget ministry didn’t immediately respond to a Bloomberg message seeking comment.

India’s Supreme Court this week said it would review fresh evidence in the purchase of French warplanes. It had previously rejected a plea and said the individual petitioner’s doubts were not enough to prompt a probe into the $8.7 billion aircraft purchase.