ITAT Mumbai Rules Business Expenses Paid via Spouse's Credit Card Are Tax-Deductible
In a significant precedent for corporate taxpayers, the Income Tax Appellate Tribunal in Mumbai ruled that legitimate business expenses paid using a spouse's credit card and subsequently reimbursed remain eligible for tax deductions. The tribunal affirmed that no statutory provision bars such payment arrangements if the commercial purpose is established.
The Income Tax Appellate Tribunal (ITAT) Mumbai bench has delivered a landmark ruling offering major clarity to business owners and self-employed professionals regarding corporate expenditure claims. The tax department had previously disallowed a deduction of ₹6.42 lakh claimed by a businessman for overseas commercial travel on the grounds that the initial transaction was executed via his wife's credit card.
Overturning the assessing officer's disallowance, the tribunal noted that the tax law does not mandate that commercial payments must strictly originate from a personal bank account, provided the reimbursement is proven and the expenditure was incurred wholly for business purposes. The decision addresses a long-standing point of friction between taxpayers and tax auditors.
Tax experts view the verdict as a pragmatic step that aligns regulatory enforcement with practical commercial realities. It reinforces the principle that substance takes precedence over form when verifying genuine business transactions.
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