TAX3701
Assignment 2
Semester 2 2025
Due 18 September 2025
, TAX3701 – Assignment 2 (Second Semester
2025)
Taxation of Business Activities
Question 1 (10 marks)
Q:
Discuss whether the amount of R95 000 received by Moses Patel (Pty) Ltd will be re-
garded as gross income as defined in the Income Tax Act for the 2025 year of assessment,
supported with relevant legislation and case law principles.
A:
Legislative Context:
Section 1 of the Income Tax Act 58 of 1962 defines gross income as: “The total amount,
in cash or otherwise, received by or accrued to or in favour of a taxpayer during a year
or period of assessment, excluding receipts or accruals of a capital nature.”
Key case law principles:
• Lategan v CIR 1926 CPD 203: “Amount” includes all forms of receipts or accruals.
• ITC 1783 (66 SATC 373): Payments for know-how are income where linked to
business operations.
• CIR v Pick ’n Pay Employee Share Purchase Trust 54 SATC 271: Receipts of a
capital nature are excluded.
Application:
• The R95 000 was received in cash and therefore qualifies as an “amount received.”
• The payment was made for services rendered (specialist know-how), which forms
part of ordinary trade.
• It is not capital in nature, as no enduring asset was disposed of.
1
Assignment 2
Semester 2 2025
Due 18 September 2025
, TAX3701 – Assignment 2 (Second Semester
2025)
Taxation of Business Activities
Question 1 (10 marks)
Q:
Discuss whether the amount of R95 000 received by Moses Patel (Pty) Ltd will be re-
garded as gross income as defined in the Income Tax Act for the 2025 year of assessment,
supported with relevant legislation and case law principles.
A:
Legislative Context:
Section 1 of the Income Tax Act 58 of 1962 defines gross income as: “The total amount,
in cash or otherwise, received by or accrued to or in favour of a taxpayer during a year
or period of assessment, excluding receipts or accruals of a capital nature.”
Key case law principles:
• Lategan v CIR 1926 CPD 203: “Amount” includes all forms of receipts or accruals.
• ITC 1783 (66 SATC 373): Payments for know-how are income where linked to
business operations.
• CIR v Pick ’n Pay Employee Share Purchase Trust 54 SATC 271: Receipts of a
capital nature are excluded.
Application:
• The R95 000 was received in cash and therefore qualifies as an “amount received.”
• The payment was made for services rendered (specialist know-how), which forms
part of ordinary trade.
• It is not capital in nature, as no enduring asset was disposed of.
1
