TAX Group Assignment i. U. Ijj. Uuju. Uu PDF

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FACULTY OF COMMERCE, ADMINISTRATION AND LAW DEPARTMENT OFACCOUNTING AND AUDITING PROJECT COVER SHEET MODULE TITLE MODULE CODE PROJECT TOPIC

TAXATION CATA 301

GENERAL DEDUCTIONS MR MADWE 17/07/2020 NON - PLAGIARISM DECLARATION I know that plagiarism means taking and using the ideas, writings, works or inventions of another as if they were one’s own. I know that plagiarism not only includes verbatim copying, but also the extensive use of another person’s ideas without proper acknowledgement (which includes the proper use of quotation marks). I know that plagiarism covers this sort of use of material found in textual sources and from the Internet. I acknowledge and understand that plagiarism is wrong. I understand that my research must be accurately referenced. I have followed the rules and conventions concerning referencing, citation and the use of quotations as set out in the Departmental Guide. This assignment is my own work, or my group’s own unique group assignment. I acknowledge that copying someone else’s assignment, or part of it, is wrong, and that submitting identical work to others constitutes a form of plagiarism. I have not allowed, nor will I in the future allow, anyone to copy my work with the intention of passing it off as their own work. By signing this cover sheet, I agree that I have read and understood the above. I acknowledge that should it be found to be higher than the acceptable similarity percentage, I may receive 0 (ZERO) for my assignment. LEARNER NAME LEARNER NO SIGNATURE MSM LUTHULI 201860097 M.S.M S SIGWEBELA 201801253 S.S M MKHIZE 201823238 M.M N MBATHA 201850170 N.M N NKONYANE 201816173 N.N LECTURER NAME DUE DATE

In order for any payment to be a deduction or be deductible, it must meet the requirements of section 11(a) read with section 23(g), it must also represent expenditure or losses actually incurred in the production of income, provided that such expenditure or loss is not capital in nature and occurred during the year of assessment. A trade must be carried on and Income must be derived from that trade to consider any expenditure incurred to be deducted. 1. • We have to first look whether the expenditure was incurred in the production of income, which is stated in the court case of COT v Rendle, and we need to check if the risk of a customer suffering damage in their mouths due to the coffee being hot is inevitable concomitant of McBurgers Ltd’s trade as they are selling coffee. • We may also use the “Port Elizabeth Electric Tramway”, which states that expenditure must be closely linked to the act of producing income as to be regarded as part of performing them. Of which in this case it is closely linked. • The expenditure which has been incurred by McBurgers Ltd was agreed upon on the Edgars Stores Ltd v CIR case, where the court stated that if the liability is certain but the amount is not accurately determined at year-end, we regard the liability as being incurred in the tax year that we dealing with. • McBurgers Ltd made an estimate of R200 000 which would be deductible. And the court cases we have looked serve as proof of this outcome. • In terms of section 24M an expense is not incurred in the tax year if it cannot be measurable or quantifiable and it can only apply to the acquisition of an asset. • Section 24M will not apply in damages expenditure.

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Billy’s Biscuits Ltd has not incurred any liability at year-end, and they will only incur the liability when the customers return the tins. The case of Pyott Ltd v CIR supports our claims with regards to these facts given. The amount of R100 000 will not be deducted and in terms of section 23(e) such a deduction will not be allowed.

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If the taxpayer incurs expenditure which is due to their own negligence it would not qualify as an inevitable concomitant in their trade, because it would be their fault because they have overlooked something in the process of conducting a trade, meaning that the damages should not be deductible. And we can use COT v RENDLE as evidence to these facts. We can also use Joffe & Co (Pty) Ltd v CIR as refence. The damages of R1 000 000 incurred by Happy Homes Ltd would not be deductible.

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Travel allowances of an employee in a company can be deducted, if there is no doubt that these expenses are required for them to conduct business and not for leisure(private purposes). In CIR v De Villiers, it was established that travelling between the taxpayer’s home and his place of work was a private expenditure and is not deductible. With SARS any expenditure incurred in travelling between home and place of work for a taxpayer is also treated as private expenditure and is also prohibited as a deduction by section 23(b) of the Income Tax Act. It is also noted that in terms of paragraph 7 of the 7th schedule states that those kilometres that will be travelled by the judge to court will be regarded as kilometres travelled for work or business purposes and that would be a fringe benefit....