Mukherjee, who arrived in Palestine on Monday for an overnight visit, was scheduled to gift some computers along with the communication equipment to the India-Palestine Centre for Excellence in Information and Communication Technology at the Al-Quds University in Ramallah, the seat of Palestine Authority.
The equipment is to come through Israel. However, Israel has declined to allow entry to any communication equipment on grounds of security but has permitted computers to be brought in. The computers will now be handed over to the university without the communication equipment.
Mukherjee will become the first Indian President to visit Israel where he travels from Ramallah on Tuesday on a three-day visit.
The Israelis have welcomed the visit which they see as a landmark in bilateral ties but have nevertheless stuck to their guns on the communication equipment, which has evoked unhappiness on the Indian side.
While the Israeli customs cleared the passage of 30 computers which were stuck at the Ashdod port to be moved to the university, the communication systems remained at the Ben Gurion airport.
Officials in Jerusalem said that the computers were now on their way after customs clearance and will reach the Centre before Mukherjee's planned inauguration.
Israeli sources sought to downplay the controversy saying that the said communication systems cannot be allowed to enter because the law does not permit for the same.
"Like Indian laws do not permit satellite phones being carried into their territory, there are technical issues around frequencies involved in the communication systems that do not pass our legal requirements," they said.
Mukherjee is to be also conferred an honorary doctorate at the Al-Quds University.
He will be in Palestine on the second leg of his three-nation historic visit to West Asia. He concluded his visit to Jordan on Sunday.
The new controversy came close on the heels of a much-publicised objection from Israel to Mukherjee's visit to the Al-Aqsa mosque, given the tense security situation in the region.
India has always been a leading partner in educational support and cooperation to Palestine. It has been at the forefront of capacity building process in Palestine extending hundreds of scholarships to Palestinian students under the ITEC programme to enable them to take up professional programmes in universities across India.
Al-Quds University is caught in current clashes, going on since September, after Israel banned the Al Aqsa mosque -- the third holiest site of Islam located in the compound of Temple Mount/Haram al-Sharif site also revered by Jews -- for Palestinians following confrontations with Jewish visitors.
Meanwhile, Ohad Horsandi, Spokesman of the Israel Embassy in Delhi, told reporters that the computers were cleared by the Customs but equipment which do not adhere to the country's regulations will not be allowed.
"Some of the systems that were shipped are systems that do not adhere to regulations. That was one of the issues," he said, adding, "As far as I know whatever cannot go as per Israeli regulations cannot go to Israel. I do not have all the information."
Drawing a parallel, the spokesperson said just like satellite phones are not allowed in India, certain equipment are not allowed in Israel.
"I know that some of the equipment that were sent do not adhere to regulations," he said, adding Israeli Foreign Ministry and India's External Affairs Ministry were aware about the issue.
He further said, "In this case, there were few a misunderstandings. The foreign ministry was approached at a late stage."