France waived millions of euros in taxes for a company owned by an Indian businessman four years ago as the two countries were negotiating a military jet deal, French newspaper Le Monde reported Saturday.
New Delhi agreed in 2016 to purchase 36 Rafale jets from France but the deal has been embroiled in misconduct allegations, with the latest report coming just days after the start of India's massive election.
According to Le Monde, taxes worth a total of 143.7 million euros ($163 million) were waived in 2015 in a settlement in favour of a French firm owned by Indian billionaire Anil Ambani's Reliance Group conglomerate.
Reliance denied accusations it had benefited from "favouritism" in a statement sent to AFP and said the fiscal dispute had been resolved "within the legal framework available to all businesses operating in France".
The French embassy in New Delhi also said the settlement had been enacted "in full respect of the legal and regulatory framework" and was free of "any political interference".
French company Dassault initially won a contract negotiated in 2012 to supply 126 jets, with 18 built in France and the rest in India by state-owned Hindustan Aeronautics Limited.
But during a visit to France in 2015, Modi scrapped the deal, replacing it with an order for 36 jets -- all to be built in France.
The new agreement, formally signed in 2016, named Reliance group as Dassault's local partner. Ambani is reported to be close to the governing party and Reliance had little experience in the aviation sector.
The government has strongly denied any misconduct in its renegotiation of the deal and accuses opposition Congress party of undermining national security to win votes.