Pakistan's military rejected Indian accusations that it had broken the ceasefire, saying Indian troops had crossed the Line of Control (LoC) overnight and opened fire first.

India had accused Islamabad of a "serious violation" of the truce, but Pakistan countered that New Delhi had engaged in "unprovoked fire."

"No Pakistani soldier had crossed the LoC," a Pakistan military spokesman said in a statement.

Pakistan also denied Indian media reports that four of its troops were killed in the fierce gunbattle in the region, which has triggered two of the three wars between the nuclear-armed neighbours.

The clash comes amid growing tensions between the South Asian rivals following a suicide bombing outside the Indian embassy in Kabul earlier this month, which Afghanistan and India have both blamed on "elements" in Pakistan.

Last week, Indian Foreign Secretary Shiv Shankar Menon said the India-Pakistan peace process was "under stress," citing incidents along the LoC and in Kashmir.

On Tuesday, Pakistan rejected the Indian army's "claim that Pakistani troops had crossed 200 metres (yards) on the Indian side of the LoC... which resulted in an exchange of fire."

"Indian soldiers wanted to establish a forward post in the area on the Pakistani side of the LoC, which was objected to by our soldiers," the Pakistan military statement said.

"Indian troops opened indiscriminate and unprovoked fire. The Indian fire was immediately responded to."

Pakistan said it had "material evidence" of the Indian incursion in the form of weapons left behind by fleeing Indian soldiers.

According to India, the fighting was sparked by an incursion and killing of an Indian soldier by a small unit of Pakistani troops in the mountains north of Srinagar, Indian Kashmir's summer capital.

"The fighting lasted for 13 to 14 hours," Indian army spokesman Anil Kumar Mathur told AFP, calling it a "serious violation of the ceasefire."

"It is a very serious issue. The Pakistanis have been violating the ceasefire over the past few months, but this is the first time they physically moved in and killed a colleague of ours."

Army officers from the two sides on Tuesday held a "flag meeting" -- or formal meeting at which they presented their versions of the incident.

In 2002, India and Pakistan came to the brink of war, massing troops along their de facto border, in the wake of an attack on the Indian parliament that New Delhi blamed on Pakistan-based rebel groups fighting its rule in Kashmir.

They agreed to a ceasefire along the LoC in November 2003 and launched a peace process in January 2004, with Pakistan pledging to prevent militant infiltrations.

Since then, the heavy guns have fallen mostly silent, but there have been sporadic small clashes.

Still, India has made repeated complaints that Pakistani troops have been helping Islamic militants infiltrate Indian territory.

India's Defence Minister A.K. Antony said in a statement that the Pakistanis had violated the LoC ceasefire as many as 19 times.

"The increase in ceasefire violations and firings across the LoC is a matter of concern to India," Antony said.

There was no immediate response from Pakistan.

An insurgency against Indian rule over a part of Muslim-majority Kashmir has raged since 1989, although Islamabad denies it is supporting the Muslim rebels.

Pakistan also has regularly complained that talks on Kashmir's future have gone nowhere.

Levels of violence had been steadily declining since 2004, but the region has witnessed a sharp upsurge in violence in recent weeks, including a bomb attack on an Indian army bus this month that killed nine soldiers.

Indian and Pakistani leaders are slated to meet at an upcoming South Asian summit in the Sri Lankan capital Colombo this weekend.

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