I-T ruling on treating discounts and ads as capex will hit e-commerce firms

Consumer technology startups that spend a lot of money on buying customers through discounts and advertising could be in for a rude shock as the Income Tax department could ask them to begin classifying their marketing expenses as capital expenditure.

The move could mean that many startups would have major tax liabilities as the money they spend on marketing activities will no longer be considered a cost to the company. Right now, most consumer tech startups report this expenditure under marketing expenses that are deducted from their revenues, causing them to post losses.

The Economic Times first reported on Monday that Flipkart