Biz travel using wife’s credit card; ITAT allows it

By Sohail Khan 12 September 2026, 4:50 pm

Synopsis

Rs 6.42 lakh foreign travel expenditure disallowed from business income as businessman used wife’s credit card to pay for it; ITAT Mumbai gives relief to taxpayer. Challa Nagendra Prasad, Judicial Member and G.M. Doss, Accountant Member of ITAT Mumbai heard this case.

Image for Rs 6.42 lakh travel expense disallowed as business expenditure over use of wife’s credit card; businessman contests tax order, wins relief in ITAT Mumbai — Rs 6.42 lakh foreign travel expenditure disallowed from business income as businessman used wife’s credit card to pay for it; ITAT Mumbai gives relief to taxpayer

The Income Tax Appellate Tribunal (ITAT) Mumbai recently granted relief to a businessman whose Rs 6.42 lakh travel expenditures were disallowed by the income tax department on the ground that he had paid for these expenses using his wife’s credit card.

Challa Nagendra Prasad, Judicial Member and G.M. Doss, Accountant Member of ITAT Mumbai, in the judgement, ruled that there is nothing in law that prevents an individual from incurring business expenditure using the credit card of his spouse and subsequently reimbursing these expenses to the spouse.

This judgement came in a tax dispute involving Mr Shah, a resident of Kanjur Village Road, Mumbai. According to the submission before the tribunal, Shah travelled to Paris, Russia, and other places for business purposes and spent a total of Rs 20.32 lakh towards travel expenses. Of this, he paid Rs 6.42 lakh using his wife’s credit card, which Shah reimbursed to her after returning to India.

This payment, however, led to a tax dispute. The Income Tax Department argued that Rs 6.42 lakh remains unexplained because Shah’s wife had no connection to his business travels, and the expenses in questions were made using her credit card. And the Income Tax Assessing Officer (AO) disallowed Rs 6.42 lakh expenditure from Shah’s business income.

The Assessing Officer also saw that travel expenditure of Rs 1.49 lakh was paid in cash, so the he disallowed 20% of that amount on the ground that the expenses could not be fully verified.

The AO also made a further disallowance of 20% on the balance of foreign travel expenditure of Rs 12.4 lakh on the ground that Shah had failed to furnish details of the foreign travel expenses, including the particulars of the persons who travelled, and the services rendered by them.

Another issue highlighted by the AO was the discrepancy between the income disclosed by Shah in his books of accounts and income shown in his Form 26AS. As per the AO, Shah’s income, as indicated in Form No. 26AS, amounted to Rs 79.87 lakh, while he reported Rs 75.51 lakh as income in his books of account. There is a difference of Rs 4,36,400. The AO wanted to bring this amount for tax.

Also read: Rs 13 lakh cash payment for credit card bill triggers tax notice; man wins case after ITAT accepts ‘family gift’ explanation

To summarise, the two disputes Shah was tangled with are:

Business expenditure made using wife’s credit card and
Income mismatch shown in Form 26AS and books of account

Feeling aggrieved, Shah filed an appeal before the Commissioner of Appeals (CIT A), but CIT (A) rejected his appeal.

Then Shah, through his chartered accountant Shashak Mehta, filed an appeal before the ITAT Mumbai. On August 31, 2026, the ITAT Mumbai granted partial relief to Shah regarding the travel expenditure made using his wife’s credit card. However, the tribunal sent the issue regarding the mismatch between income shown in Form 26AS and books of accounts back to the AO for verification.

How did Shah win the case in ITAT Mumbai?

Pranshu Goel, Partner at Ashok Pranshu & Co. said to ET Wealth Online that the Hon’ble ITAT Mumbai ruled in the businessman’s favour because the expenses were genuinely incurred for foreign business travel and were merely routed through his wife’s credit card before being reimbursed to her.

ITAT Mumbai held that no provision of law prohibits a person from paying business expenses through a wife's card. According to Pranshu, ITAT Mumbai also rejected the view that reimbursement amounted to payment for services rendered by the wife requiring tax deduction at source, since she had rendered no independent service.

Pranshu advises that today it might be common trend to use a family member's credit card for own expenses in order to maximise reward points, cashback or travel benefits. He says: "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."

Pranshu also says that it is also worth noting that since high-value card spends are now reported and reflected in AIS/TIS, expenditure disproportionate to the cardholder’s disclosed income may invite scrutiny from tax department unless its source and reimbursement are properly explained.

ITAT Mumbai order summary

Shah’s chartered accountant, Shashak Mehta, explained to the ITAT Mumbai that his client (Shah) spent Rs 3.97 lakh for travelling to Metal Expo (Russia) and Rs 4.94 lakh for travelling to CNR Expo, Istanbul (Turkey).

Mehta explained that some portion of the travel expenditure (Rs 3.97 lakh + Rs 4.94 lakh = Rs 8.91 lakh) was made using Shah’s wife’s card. Mehta submitted the expenditure list and Shah’s wife’s bank account statement to support his claim.

Mehta also relied on a similar case decided by the ITAT Mumbai in the case of Girish Raghavan, ITA No. 6955/Mum/2025, dated March 4, 2026.

The ITAT Mumbai said: “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.”

The ITAT Mumbai also said that there was nothing untoward in such an arrangement for incurring business expenditure.

Thus, on this ground, the ITAT Mumbai rejected the CIT (A)’s view, which said that Shah should have deducted TDS on such reimbursement made to his wife if Shah intended to show this activity as service rendered by his wife in her independent capacity.

The ITAT Mumbai said: “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.”

The ITAT Mumbai also applied the precedent set by the Girish Raghavan case as highlighted by Mehta and deleted the ad hoc disallowances too.

However, the Form 26AS and books of accounts mismatch issue was not decided in this case, as the ITAT Mumbai remanded it back to the AO for verification of the reconciliation statement filed by Shah and for passing a fresh order in accordance with law after affording adequate opportunity of hearing to the assessee.

Thus, based on the above discussion, Shah partly won the case.