Time magazine's former Jerusalem bureau chief testified today that, in hindsight, he would have used language different from the paragraph of the 1983 article that prompted former Israeli defense minister Ariel Sharon's $50 million libel lawsuit against the magazine.

The statement by former bureau chief Harry Kelly came in response to persistent questioning by Sharon's lead counsel and the judge in the four-week trial. District Court Judge Abraham D. Sofaer pounded his lectern as he questioned Kelly about whether the controversial paragraph met journalistic standards.

At first Kelly joked, saying he certainly would not approve the same paragraph if he had known it would lead to the libel suit and trial. He then indicated that he now feels that the words used might have given a slightly exaggerated impression of what Time knew about Sharon's conversation with Lebanese Phalangist Christian leaders the day before Phalangist militiamen began massacring hundreds of Palestinians at two Beirut refugee camps.

But Kelly said there was never any intention on Time's part to defame Sharon or to suggest that, by allowing Phalangist militiamen into the camps, Sharon had encouraged or inspired members of the Gemayel family to take revenge for the killing of Phalangist leader Bashir Gemayel.

The Sharon legal team was attempting to prove that Time's bureau had forwarded libelous information to editors in New York who in turn transformed it into an even more damaging article. As Kelly testified, attorneys assisting in Sharon's case displayed to the jury a poster-sized blow-up of the controversial paragraph and another of the telex Kelly sent to his editors.

As a formal Israeli commission was investigating the massacres in December 1982, David Halevy, a correspondent working under Kelly in the Jerusalem bureau, sent a memo to Time editors in London and New York saying the commission had just discovered notes indicating that in Sharon's meeting with the Gemayels, Sharon "gave them the feeling after the Gemayels' questioning, that he understood their need to take revenge for the assassination of Bashir."

Two months later the commission issued a report finding that Sharon, because he had not foreseen the clear possibility that massacres would occur, bore "indirect responsibility" for them. The commission absolved Sharon and all other Israeli officials of any direct culpability. At the same time, it said additional information on the killings was included in an appendix to its public report.

From the Time bureau in Israel, Halevy contacted two sources for his original memo to determine whether the notes about Sharon's conversation with the Gemayals were in the appendix. In earlier testimony in this trial, Halevy acknowledged that he told Kelly they were, but that in fact his sources had told him only that the names of the note-takers were in the appendix. Halevy said it was his "analysis" that the notes were there also.

On Halevy's confirmation, Kelly said in a long dispatch to New York that the notes referred to in Halevy's December memo were in the secret appendix.

In New York, that dispatch and other information from correspondents in Jerusalem, Cairo, Beirut and Rome were compiled into a cover story by a writer, whose words ultimately appeared in the magazine. Sharon, the story said, had "reportedly discussed with the Gemayels the need to take revenge for the assassination of Bashir."

Kelly said he approved that rewrite when a draft of it was relayed by telex to the bureau in Jerusalem but today, on reflection, he probably would not do so. "I would not have used the word 'discussed,' " he said.