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France waived tax for Anil Ambani firm; says as per law

Sushant Singh
Le Monde reported that Anil Ambani’s France-based telecom firm ‘Reliance Atlantic Flag France’ was given tax waivers worth 143.7 million euros by local authorities just a few months after Prime Minister Narendra Modi announced the procurement of 36 Rafale fighter jets from Dassault.

The French daily Le Monde reported Saturday that the French government waived a 143.7 million tax liability for Anil Ambani's France-based company, Reliance Atlantic Flag France, barely six months after Prime Minister Narendra Modi announced the government-to-government deal for 36 Rafale fighter jets in Paris in 2015.

According to the report, the French authorities had raised a demand of 151 million from Ambani's company after tax audits for the period between 2007 and 2012, including default interest and penalties. Ambani's firm had offered a settlement for 7.6 million in 2013, which was rejected by the French tax authorities. However, on October 22, 2015, the French authorities accepted 7.3 million as settlement from Ambani's company for the period 2008-14. Read in Bangla, Malayalam, Tamil

The Defence Ministry, Ambani's Reliance group, and the French Embassy in New Delhi issued statements Saturday denying links between the tax waiver and the Rafale deal.

The Ministry said that "any connections drawn between the France waived tax for Anil Ambani firm; says as per law tax issue and the Rafale matter is totally inaccurate, tendentious and is a mischievous attempt to disinform".

"We have seen reports drawing conjectural connection between tax exemption to a private company and procurement of Rafale fighter jets by Government of India," it said in a statement. "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."

In response to the Le Monde report, the French embassy at New Delhi said: "A global settlement was reached between the French tax authorities and Reliance Flag, a telecom company, in a tax dispute pertaining to the period 2008-2012. This settlement was conducted in full adherence with the legislative and regulatory framework governing this common practice of the tax administration. It was not subject to any political interference whatsoever."

Ambani's Reliance group said in a statement that it "denies any favouritism or gain from settlement. Reliance Flag settled disputes as per legal framework in France available to all companies operating in France".

The statement said: "Reliance FLAG Atlantic France SAS is a subsidiary of Reliance Communications, India. FLAG France owns a terrestrial cable network and other telecom infrastructure in France. During the period under consideration by the French Tax Authorities - 2008-2012 - i.e. nearly 10 years ago, Flag France had an operating loss of Rs 20 crore (i.e. 2.7 million). French tax authorities had raised a tax demand of over Rs 1,100 crore for the same period. As per the French tax settlement process as per law, a mutual settlement agreement was signed to pay Rs 56 crore as a final settlement."

The Le Monde report said that in early 2015, the French auditor firm AEG France had refused to certify Reliance Flag Atlantic France's accounts as it was not sure if they were "straightforward and accurate" according to the rules.

The tax administration had argued that Ambani's company was "improperly documenting its transactions with other companies within the Reliance Group - a commonly used technique to move transfers to tax havens so that it can avoid a tax burden".

It also said that the parent company of the French company of Anil Ambani, Reliance Globalcom Limited, was domiciled in Bermuda, a territory that is on a blacklist of tax havens of the European Union.

Prime Minister Modi announced the 36-jet deal on April 10, 2015, when he was on an official visit to France. Soon after the announcement, Ambani's Reliance group emerged as the lead offset partner for the deal. The total offsets for the deal - worth 7.87 billion - to be discharged in India were valued at Rs 30,000 crore.

In late April 2015, Anil Ambani's company Reliance Aerostructures Limited formed a joint venture with Dassault Aviation. The MoU for the aircraft deal was signed between the Indian and French defence ministers in New Delhi on January 25, 2016. The deal was finally signed on September 23, 2016.

The production unit of the joint venture, called Dassault Reliance Aerostructures Limited, was inaugurated in Nagpur on October 2017 in the presence of top Indian and French ministers.

As reported by The Indian Express, days before the MoU was signed in New Delhi, another of Ambani's firms, Reliance Entertainment, had invested in a French film produced by the then French President Francois Hollande's partner, Julie Gayet.

Hollande had subsequently denied any connection between the film's funding and the deal. But he told AFP that giving offset contracts to Ambani was part of a "new formula" for buying 36 Rafale aircraft which was put forth after the government under PM Modi assumed power in May 2014. The government had denied this.

The Indian Express has also reported that Anil Ambani had met the advisors to the then French defence minister in his office two weeks before the Rafale deal was announced by PM Modi. Dassault Aviation, the French company manufacturing Rafale jets, has repeatedly claimed that Reliance Defence was chosen as an offset partner on merit.

Earlier this week, the Supreme Court had dismissed the government's arguments that several secret documents about the Rafale deal could not be examined by the court because they had been "stolen". Deciding that it would review its earlier decision to not order an investigation in the deal in light of the new evidence, the Supreme Court concluded that any reference to the government's privilege to not reveal details "has to be essentially adjudged on the touchstone of public interest".