TAX2601 Assignment 3 (COMPLETE ANSWERS) Semester 2 2024 - DUE 2 September 2024 ; 100%TRUSTEDComplete, trusted solutions and explanations.

TAX2601 Assignment 3 (COMPLETE ANSWERS) Semester 2 2024 - DUE 2 September 2024 ; 100%TRUSTEDComplete, trusted solutions and explanations.QUESTION 1 (12 marks) Easy Elevators (Pty) Ltd’s (“EE”)core business is the maintenance of elevators in residential andcommercial buildings in the Gauteng region. It has serviceagreements with each of its customers and in terms of these, amonthly maintenance fee of R15 000 is payable on or beforetheseventh (7th) day of each month before that month’s serviceoccurs. EE is a company incorporated in South Africaanditsyear of assessment ends on 31 March. One of EE’s customerspaid an amount of R45 000 into EE’s bank account on7March2024. This amount is for the maintenance service fees inrespectof the following three months i.e. March 2024 to May2024. EEwas informed by the customer that the building’s caretaker decided to pay three months’ fee upfront as he wouldbeout ofthe country for an extended period and wanted to ensurethemaintenance of the elevators would continue as usual duringthistime. REQUIRED MARKS Discuss whether the receipt of theR45 000 maintenance service fee would constitute gross incomeof Easy Elevators (Pty) Ltd as defined in the Income TaxAct 58of 1962 for the year of assessment ending 31 March2024. Listall the gross income definition requirements, discuss eachoneand briefly refer to case law to strengthen your argument. 124TAX2601/2024/Semester 2/Assessment 3 To determine whether the receipt of R45,000 by EasyElevators(Pty) Ltd (EE) would constitute gross income for the year ofassessment ending 31 March 2024, we need to analyzethesituation in terms of the definition of gross income as outlinedinthe Income Tax Act 58 of 1962. Definition of Gross Income According to the Income Tax Act 58 of 1962, gross incomeisdefined as: Gross income means the total amount in cash or otherwise, received by or accrued to or in favor of any person, excludingreceipts or accruals of a capital nature. The key elements to determine if the R45,000 receipt constitutesgross income are: 1. Receipt or Accrual 2. In Favour of the Taxpayer 3. In Cash or Otherwise 4. Not of a Capital Nature Analysis of Each Requirement 1. Receipt or Accrual Requirement: The amount must have been receivedoraccrued to the taxpayer. Application: In this case, EE received R45,000on7March2024. This receipt qualifies as a transaction wherecashwasreceived. Case Law Reference: The case of CIR v GeorgeForest Timber Co Ltd (1924 AD 516) illustrates that thedetermination of whether something constitutes grossincome can depend on whether the receipt is deemedtohave accrued or been received according to the accountingpractices of the taxpayer. 2. In Favour of the Taxpayer Requirement: The amount must be received byor accrueto the taxpayer. Application: The R45,000 was deposited into EE's bankaccount, which directly benefits EE. Therefore, theamountis in favor of EE. Case Law Reference: The case of CIR v Tuck (1942AD391) supports the principle that amounts receivedor accrued to the taxpayer in a beneficial capacityareconsidered gross income. 3. In Cash or Otherwise Requirement: The amount must be received incashorinsome other form. Application: The R45,000 was received in cash, as it wasadeposit into EE’s bank account. Case Law Reference: In CIR v Meyer (1955 (3) SA540(A)), it was established that amounts received inanyform,including cash or equivalent, qualify as gross income. 4. Not of a Capital Natur