Am I wrong here with regards to my mother in war ?

Your Mother in Law sounds like an absolute NUT. She is going out and buying things for your son and then asking you to pick up the bill? Thats craziness and it would be unacceptable if it was your Mother too. Did she just go out and pick it up or did you ask her too? If you didn't ask her I would refuse to give her any money for it. What kind of grandmother is this?