TAX2601
ASSIGNMENT 03
SEMESTER 2 2022
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, Question 1
DEFINITION DISCUSSION
A trade must be carried on Manufac(LTD) is the practice of carrying out a trade.
In the production of income Closely connected to the income earning operations,
There was an inherent risk that an accident might occur.
Because manufac was alleged infringed on a design of a
similar product
Expenditure and losses Manufac only paid the R352 000 on 10 January 2022. This
amount was paid to ABC Ltd.
Actually incurred An agreement was concluded on 15 November 2021 to pay
an amount of R352 000 to ABC and therefore has an
unconditional liability to pay.
During the year of assessment Although the amount of R352 000 was paid to ABC on 10
JANUARY , it falls in the current year of assessment as it
was incurred on 15 November 2021.
Not of a capital nature The amount paid as compensation to ABC is not
creating an enduring benefit and is not of a capital nature.
Conclusion Manufac (Pty) Ltd. is not eligible to claim a deduction for
the relevant R352,000. According to the quality method, an
expense can only be deducted if it was incurred with the
intention of generating a profit.
Therefore All the requirements for the general deduction
formula have been met, therefore the amount paid will
qualify as a deduction in terms of the general deduction
formula for the 2021 year of assessment.
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ASSIGNMENT 03
SEMESTER 2 2022
0|Page
, Question 1
DEFINITION DISCUSSION
A trade must be carried on Manufac(LTD) is the practice of carrying out a trade.
In the production of income Closely connected to the income earning operations,
There was an inherent risk that an accident might occur.
Because manufac was alleged infringed on a design of a
similar product
Expenditure and losses Manufac only paid the R352 000 on 10 January 2022. This
amount was paid to ABC Ltd.
Actually incurred An agreement was concluded on 15 November 2021 to pay
an amount of R352 000 to ABC and therefore has an
unconditional liability to pay.
During the year of assessment Although the amount of R352 000 was paid to ABC on 10
JANUARY , it falls in the current year of assessment as it
was incurred on 15 November 2021.
Not of a capital nature The amount paid as compensation to ABC is not
creating an enduring benefit and is not of a capital nature.
Conclusion Manufac (Pty) Ltd. is not eligible to claim a deduction for
the relevant R352,000. According to the quality method, an
expense can only be deducted if it was incurred with the
intention of generating a profit.
Therefore All the requirements for the general deduction
formula have been met, therefore the amount paid will
qualify as a deduction in terms of the general deduction
formula for the 2021 year of assessment.
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