TAX3701
Assignment 2
Semester 2 2025
Due on Thursday, 18 September 2025
, TAX3701 – Assignment 2 (Second Semester 2025)
Taxation of Business Activities
Worked-Out and Referenced Solutions
Question 1 (10 marks)
Q: Discuss whether the amount of R95 000 received by Moses Patel (Pty) Ltd (MP)
will be regarded 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.”
Case law principles:
• Lategan v CIR 1926 CPD 203 : “Amount” includes all receipts and 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 : Capital
receipts are excluded.
Application
The R95 000 was received in cash and therefore qualifies as an “amount received.” The
payment was made for services rendered by MP’s animal feeding specialist. This
constitutes part of MP’s ordinary course of trade and not a capital disposal. The
receipt is therefore revenue in nature, consistent with ITC 1783.
Conclusion
The R95 000 is included in MP’s gross income for the 2025 year of assessment as a fully
taxable revenue receipt.
1
Assignment 2
Semester 2 2025
Due on Thursday, 18 September 2025
, TAX3701 – Assignment 2 (Second Semester 2025)
Taxation of Business Activities
Worked-Out and Referenced Solutions
Question 1 (10 marks)
Q: Discuss whether the amount of R95 000 received by Moses Patel (Pty) Ltd (MP)
will be regarded 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.”
Case law principles:
• Lategan v CIR 1926 CPD 203 : “Amount” includes all receipts and 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 : Capital
receipts are excluded.
Application
The R95 000 was received in cash and therefore qualifies as an “amount received.” The
payment was made for services rendered by MP’s animal feeding specialist. This
constitutes part of MP’s ordinary course of trade and not a capital disposal. The
receipt is therefore revenue in nature, consistent with ITC 1783.
Conclusion
The R95 000 is included in MP’s gross income for the 2025 year of assessment as a fully
taxable revenue receipt.
1
