Rs 6.42L business travel paid via wife’s card, man gets tax notice; what ITAT said

The individual said he reimbursed his wife after returning to India. (Image for representative purpose only)You incur business expenses on your wife’s credit card and reimburse her. But the tax department raises an objection. This is what happened with a Mumbai-based business man, who then won partial relief from the ITAT.The Income Tax Appellate Tribunal ruled that genuine business travel expenses do not become disallowable merely because they were initially paid using his wife’s credit card and later reimbursed to her.The Income Tax Appellate Tribunal (ITAT) Mumbai has provided partial relief to a businessman after the income tax department disallowed Rs 6.42 lakh of his travel expenses because the payments had been made using his wife's credit card.In its judgment, Challa Nagendra Prasad, Judicial Member, and GM Doss, Accountant Member, held that there is no legal bar on a person using their spouse's credit card to meet business expenses and subsequently reimbursing the spouse for those payments.What the case is aboutThe ruling arose from a tax dispute involving a resident of Mumbai. According to the submissions before the tribunal, the man traveled to Paris, Russia and other destinations for business purposes and incurred total travel expenses of Rs 20.32 lakh.Of this amount, Rs 6.42 lakh was paid through his wife's credit card. The individual said he reimbursed his wife after returning to India.The arrangement, however, came under scrutiny during assessment. The Income Tax Department treated the Rs 6.42 lakh as unexplained, arguing that the man’s wife had no connection with his business travel and that the expenditure had been incurred through her credit card. The Assessing Officer (AO) consequently disallowed the Rs 6.42 lakh from the man’s business expenditure.The AO also questioned another portion of the businessman’s travel expenses. Since Rs 1.49 lakh had been paid in cash, the officer disallowed 20% of this expenditure on the ground that the expenses could not be completely verified.A further 20% disallowance was made on the remaining foreign travel expenses of Rs 12.4 lakh. The AO said the man had not furnished adequate details of the foreign travel, including information about the people who travelled and the services they provided.Income mismatch between books and Form 26ASThe assessment also raised a separate issue concerning the income reported by the taxpayer.According to the AO, Form 26AS showed the man’s income at Rs 79.87 lakh, whereas his books of account reflected income of Rs 75.51 lakh. The difference worked out to Rs 4,36,400, which the AO sought to bring to tax.The dispute before the tax authorities therefore involved two separate issues:Business expenses paid using his wife's credit cardDifference between the income reported in Form 26AS and the man’s books of accountThe individual first challenged the assessment before the Commissioner of Appeals (CIT A), but his appeal was rejected.He then approached ITAT Mumbai. On August 31, 2026, the tribunal granted him partial relief on the disallowance relating to travel expenses paid through his wife's credit card, according to an ET report.However, it did not finally decide the issue concerning the Rs 4,36,400 difference between Form 26AS and the books of account. Instead, the tribunal sent that matter back to the Assessing Officer for verification.How did the man win the case in ITAT Mumbai?Pranshu Goel, Partner at Ashok Pranshu & Co., told ET, that ITAT Mumbai ruled in the man’s favour after finding that the disputed expenses were genuinely incurred for foreign business travel. The fact that the payments were initially made through his wife's credit card and later reimbursed to her did not change the nature of the expenditure.The tribunal held that there is no provision under the law preventing a taxpayer from using his wife's credit card to meet business expenses. Pranshu said the tribunal also rejected the argument that the reimbursement represented payment for services provided by the man’s wife and therefore required tax deduction at source, since she had not rendered any independent service.Using a family member's credit card for personal or other expenses can be a common practice, particularly to earn reward points, cashback or travel benefits, Pranshu said. However, he cautioned taxpayers against overlooking the documentation.Pranshu advises: "However, taxpayers must preserve the complete documentary trail, purpose, invoices, card statements and proof of reimbursement to substantiate that the expense is for the purpose of business and is not a personal expenditure."He also pointed out that high-value credit card transactions are now reported and reflected in AIS/TIS. As a result, spending that appears disproportionate to the cardholder's disclosed income could attract scrutiny from the tax department unless the source of the payment and subsequent reimbursement are properly explained.What ITAT saidDuring the proceedings, the individual’s chartered accountant provided details of the foreign business travel. He told the tribunal that the man had incurred Rs 3.97 lakh for travel to Metal Expo in Russia and Rs 4.94 lakh for travel to CNR Expo in Istanbul, Turkey.Together, these expenses amounted to Rs 8.91 lakh. The CA said a portion of this expenditure had been paid through the man’s wife's credit card. To support the claim, he submitted the expenditure details along with his wife's bank account statement.The CA also cited a previous ITAT Mumbai ruling in the case of Girish Raghavan, ITA No. 6955/Mum/2025, dated March 4, 2026.The tribunal accepted the argument that using a spouse's credit card to incur business expenses was not prohibited by law.“There is nothing in law which precludes an assessee from incurring business expenditure through the credit card of his spouse and thereafter reimbursing the said expenditure to the spouse.”ITAT Mumbai further found nothing improper in such an arrangement for meeting business expenses.The finding also went against the reasoning adopted by the CIT (A). The appellate authority had held that the man should have deducted TDS on the reimbursement to his wife if the transaction was being treated as payment for services she had independently provided.The tribunal rejected that interpretation, observing:“No payment was made towards any service rendered by Smt. Shah; the amount was merely reimbursed to her since her credit card had been utilised for incurring the expenditure. The addition on this count is, therefore, unwarranted and is directed to be deleted.”Relying on the Girish Raghavan precedent cited by the CA, the tribunal also deleted the ad hoc disallowances relating to the travel expenditure.The separate discrepancy between the income reported in Form 26AS and the books of account was not finally decided by ITAT Mumbai. Instead, the tribunal sent the matter back to the Assessing Officer to examine the reconciliation statement submitted by the man and pass a fresh order in accordance with law after giving the assessee an adequate opportunity of being heard.