Israeli media outlet Ynetnews had reported that Mr Tata was part of the project that Mr Netanyahu tried to push to help Mr Milchan.
The news report is "grossly incorrect in its references about Mr Ratan N Tata", the industrialist's office told news agency Press Trust of India.
Israeli police had earlier this week recommended that Mr Netanyahu be indicted for bribery, fraud and breach of trust.
"According to the police, the most glaring example of Netanyahu working against Israel's interests to benefit Milchan was his efforts (to) promote a free trade zone on the Israel-Jordan border, a project the Hollywood producer sought to promote as part of his partnership with Indian Industrialist Ratan Naval Tata," Ynetnews reported.
The project, which the Israeli police said went against the recommendations of the country's military, would have generated Milchan and Tata "a huge profit," but was scrapped because it would've cost the state an unreasonable amount in security expenses, the Israeli news portal said.
Last year, the Israeli media had reported that Tata "testified" before the Israeli police in connection with these allegations during his trip to Tel Aviv in the end of October-November on the sidelines of a business event.
A statement emailed to PTI by Mr Tata's office did not deny the meeting between him and the Israeli officials. But it said the reports in Israeli media on the contents of the meeting are "factually incorrect and appear to have been motivated".
Mr Netanyahu has already dismissed the allegations against him.
(With inputs from PTI)