UNIVERSITY OF SOUTH AFRICA (UNISA)
College of Accounting Sciences
⋄
ASSESSMENT 1
Semester 1, 2026
⋄
Module Code: TAX2601
Module Name: Principles of Taxation
Assignment No.: Assessment 1
Due Date: 8 April 2026 at 10:00
Semester: Semester 1, 2026
Submitted in partial fulfilment of the requirements for Principles of Taxation (TAX2601)
at the University of South Africa.
, UNISA | TAX2601 Principles of Taxation – Assignment 1
Question 1: General Deduction Formula – Dzindu Properties (Pty) Ltd
1.1 Overview of the General Deduction Formula
Section 11(a) of the Income Tax Act 58 of 1962 permits a deduction of expenditure and losses
actually incurred in the production of income, provided such expenditure and losses are not
of a capital nature. This provision must be read together with section 23, which lists prohib-
ited deductions. For an amount to qualify for deduction, all the requirements of the general
deduction formula must be satisfied.
The requirements that must be met are:
1. The expenditure or loss must have been actually incurred.
2. It must have been incurred during the year of assessment.
3. It must have been incurred in the production of income.
4. It must not be of a capital nature.
5. It must not be prohibited by section 23.
1.2 Application to the Development Cost of Destroyed Properties
Requirement 1: Actually Incurred
Dzindu Properties (Pty) Ltd incurred development costs of R2 700 000 in constructing the
residential houses that were subsequently destroyed. These costs were actually incurred
in the sense that a legally enforceable obligation arose, and the amounts were spent. This
requirement is therefore satisfied.
Requirement 2: During the Year of Assessment
The financial year of Dzindu ends on 30 March. The rainstorm occurred in November 2025,
which falls within the year of assessment ending 30 March 2026. The loss arose in this year.
This requirement is satisfied.
Page 1 of 14
College of Accounting Sciences
⋄
ASSESSMENT 1
Semester 1, 2026
⋄
Module Code: TAX2601
Module Name: Principles of Taxation
Assignment No.: Assessment 1
Due Date: 8 April 2026 at 10:00
Semester: Semester 1, 2026
Submitted in partial fulfilment of the requirements for Principles of Taxation (TAX2601)
at the University of South Africa.
, UNISA | TAX2601 Principles of Taxation – Assignment 1
Question 1: General Deduction Formula – Dzindu Properties (Pty) Ltd
1.1 Overview of the General Deduction Formula
Section 11(a) of the Income Tax Act 58 of 1962 permits a deduction of expenditure and losses
actually incurred in the production of income, provided such expenditure and losses are not
of a capital nature. This provision must be read together with section 23, which lists prohib-
ited deductions. For an amount to qualify for deduction, all the requirements of the general
deduction formula must be satisfied.
The requirements that must be met are:
1. The expenditure or loss must have been actually incurred.
2. It must have been incurred during the year of assessment.
3. It must have been incurred in the production of income.
4. It must not be of a capital nature.
5. It must not be prohibited by section 23.
1.2 Application to the Development Cost of Destroyed Properties
Requirement 1: Actually Incurred
Dzindu Properties (Pty) Ltd incurred development costs of R2 700 000 in constructing the
residential houses that were subsequently destroyed. These costs were actually incurred
in the sense that a legally enforceable obligation arose, and the amounts were spent. This
requirement is therefore satisfied.
Requirement 2: During the Year of Assessment
The financial year of Dzindu ends on 30 March. The rainstorm occurred in November 2025,
which falls within the year of assessment ending 30 March 2026. The loss arose in this year.
This requirement is satisfied.
Page 1 of 14
