A Mumbai-based taxpayer has learnt the hard way that using a spouse's credit card for business expenditures does not automatically qualify those costs for tax deductions. The Income Tax Appellate Tribunal (ITAT) in Mumbai recently dismissed a claim of ₹6.42 lakh raised by the assessee as business travel expenses, observing that the payments were made through his wife's credit card rather than his own account.
The assessee, who runs a business in Mumbai, had filed his income tax return claiming a deduction for travel-related expenses incurred during the relevant financial year. When the case was taken up for assessment, the income tax department noticed that the invoices and payment receipts referenced a credit card issued in the name of the taxpayer's wife. The department argued that since the payments did not originate from the assessee's bank account or his own credit card, the expenses could not be treated as his business outgo.
During the proceedings before the Tribunal, the taxpayer attempted to argue that the credit card was used for legitimate business purposes and that the funds ultimately came from his own business account, with his wife merely acting as a convenient channel for payment. However, the ITAT found that no independent corroborating evidence — such as a bank statement showing a clear flow of funds from the assessee's account to his wife's credit card specifically for these travel expenses — was produced to substantiate the claim.
The Tribunal observed that merely holding a married relationship between the cardholder and the assessee was insufficient to establish that the expenditure was genuinely incurred by the business owner. Without documentary proof linking the payment source directly to the taxpayer's own finances, the disallowance raised by the tax department stood upheld.
This case highlights a recurring issue in Indian tax litigation where taxpayers, particularly those in the small and medium business segment, often rely on shared household finances for business transactions. Tax authorities have increasingly been scrutinizing such arrangements, especially after the implementation of digital payment tracking under the Indian tax system, where every credit card transaction leaves a traceable record.
Tax experts say the ruling serves as a reminder that business expenses must be clearly and independently documented. They advise businessmen to maintain separate business accounts and avoid mixing personal and household credit facilities with official business spending, ensuring that the paper trail aligns seamlessly with the claimed deductions.
