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Consumer technology startups in India which 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 is deducted from their revenues, causing them to post losses.The Economic Times first reported on Monday that Flipkart had lost an appeal against the IT department over the reclassification of marketing expenses and discounting as capital expenditure. The report stated that the IT department's move could affect all large e-commerce firms in the country as well as startups."It's a significant liability. If the tax department's stance is taken, essentially marketing and .

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