"We have seen reports drawing conjectural connection between tax exemption to a private company and procurement of Rafale jets by GoI. Neither the period of tax concession nor subject matter of concession relate to Rafale procurement, concluded in present Govt's tenure," said a statement by the ministry, according to news agency ANI.
Dismissing any link between the Rafale deal and the "tax exemption" to Ambani's firm, the defence ministry said, " ... connections drawn between the tax issue and the Rafale matter are totally inaccurate, tendentious and is a mischievous attempt to disinform (sic)."
Earlier, leading French newspaper Le Monde had reported that France waived taxes worth 143.7 million euros of a French-registered telecom subsidiary of Anil Ambani's Reliance Communications in 2015, months after India's announcement of buying 36 Rafale jets.
In its reaction, Reliance Communications rejected any wrongdoing and said the tax dispute was settled under legal framework which is available for all companies operating in France.
Responding to the news report, France has said a global settlement was reached between the French tax authorities and the Reliance subsidiary and that it was not subject to any political interference.
"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," the French embassy said in a statement.
It further said, "This settlement was conducted in full adherence with the legislative and regulatory framework governing this common practice of the tax administration," the embassy said.
The French newspaper said the French tax authorities accepted 7.3 million euros from Reliance Flag Atlantic France as a settlement as against original demand of 151 million euros. Reliance Flag owns a terrestrial cable network and other telecom infrastructure in France.
The French newspaper said the company was investigated by French tax authorities and found liable to pay 60 million euros in taxes for the period 2007 to 2010.
However, Reliance offered to pay 7.6 million euros only as a settlement but it was French tax authorities which refused to accept the amount. The authorities conducted another probe for the period 2010 to 2012 and asked the company to pay an additional 91 million euros in taxes, the report said.
It said by April 2015, the total amount owed by Reliance to the French authorities in taxes was at least 151 million euros.
In October, six months after PM Modi announced in Paris about the Rafale deal, the French authorities accepted 7.3 million euros from Reliance as a settlement as against the original demand of 151 million euros.
A spokesperson of Reliance Communications said the tax demands were "completely unsustainable and illegal" and that the company denied any favouritism or gain from the settlement.
"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 (Euro 2.7 million). French tax authorities had raised a tax demand of over Rs 1100 crore for the same period," the official said.
"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," he said.