Time magazine, in its issue appearing on newsstands today, calls the $50 million libel suit brought against it by former Israeli defense minister Ariel Sharon "battling over a paragraph."

By coincidence, Sharon's lawyers today brought into court a 3-by-4-foot enlargement of the controversial paragraph, which appeared in a February 1983 Time article reporting on the official Israeli investigation of the 1982 massacre of Palestinian civilians by Christian Phalangists in two refugee camps in Beirut.

The paragraph alleges that a secret appendix to the Kahan Commission's report contained information that Sharon, during a condolence call with the family of slain Phalangist leader Bashir Gemayal the day before the massacres began, had discussed the need to take revenge for the Lebanese president-elect's assassination.

When the poster was shown in court today, Sharon squirmed in the witness box, pursed his lips and narrowed his eyes.

"It has caused a terrible damage to my reputation," he testified, his voice heavy with emotion.

In the third day of direct questioning from his attorney, Milton S. Gould, Sharon testified about the decision leading to the Israeli invasion of Lebanon in the summer of 1982 and how he went about approving the dispatch of Lebanese Christian Phalangist militiamen into the Palestinian camps.

Much of what he had to say today tracked over the testimony he gave the Kahan Commission. Sharon noted that the panel found that neither he nor any other Israeli bore direct responsibility for the deaths of the more than 700 Palestinians killed in the Sabra and Shatila camps.

He failed to mention, however, that the commission had determined that he made a "grave mistake" in not anticipating that the Phalangist militiamen would likely seek revenge for the death of Gemayel and that the panel recommended his removal as defense minister.

Sharon did provide one new detail about the massacres. He indicated that joining the Phalangists in the camps during the massacres were some troops of Saad Haddad, the renegade Lebanese army major whose border forces were armed, uniformed and trained for years by the Israelis. Haddad died earlier this year.

The Kahan Commission found no evidence of participation by Haddad's forces, but Sharon testified today that he learned during the massacres that some of Haddad's men were in the area.

Sharon said a duty officer in Israel's war "situation room" informed him at the time that Israeli soldiers had killed one of Haddad's soldiers and captured two others.

"To me it was very unusual that our forces would shoot forces that were helping us," Sharon testified. But, he added, he believed this was an example of the "severe steps" Israeli troops took in an effort to halt attacks on Palestinian civilians.

Gould and Sharon spent much of today recounting the condolence call that Sharon and other Israeli intelligence officials paid to the Gemayal family in September 1982. Sharon said they met with Gemayal's father, Pierre, and brother, Amin, currently the president of Lebanon. Sharon said that although bereaved, both men appeared calm and restrained.

He said there was no mention of any retaliation for Bashir Gemayal's death or plans for revenge.