Hence, these should not be deducted from revenue.The tax department, in its assessment order, has justified its stance by claiming that marketing costs for ecommerce companies constitute capital expenditure as they are creating intangibles that may aid future revenue.If the tax department's methodology is followed, ecommerce companies could turn profitable and be liable for tax in India. "What business expenditure to incur and what quantum is the prerogative of the business concerned to decide. And this is not a revenue expense," said a person with direct knowledge of the matter. "Currently there is no provision under the tax law under which a company may not be allowed to deduct genuine marketing expense incurred for business purposes from total revenues. The only way the deduction could be limited is to allege that this is not revenue expenditure," said Maheshwari.

Source: Economic Times September 01, 2017 18:42 UTC