, TAX3701 Assignment 2 (COMPLETE ANSWERS)
Semester 2 2025 - DUE 18 September 2025; 100% correct
solutions and explanations.
Question 1 (10 marks, 18 minutes):
Discussion
1. Definition of gross income
In terms of section 1 of the Income Tax Act 58 of 1962, gross income is defined as:
“the total amount, in cash or otherwise, received by or accrued to or in favour of a
resident, during a year of assessment, excluding receipts or accruals of a capital
nature…”
Since Moses Patel (Pty) Ltd (MP) is a South African resident company, its gross
income includes all receipts and accruals, both local and foreign, unless capital in nature.
2. Nature of the R95 000 received
The amount was received as payment for services rendered by MP’s animal
feeding supplement specialist.
According to case law (CIR v Lever Brothers & Unilever Ltd 1946 AD 441, 14
SATC 1), amounts received in exchange for services are of a revenue nature.
Similarly, in CIR v Pick ’n Pay Employee Share Purchase Trust 54 SATC 271,
it was held that amounts received in the course of carrying on business form part
of gross income.
3. Timing of inclusion
MP’s year of assessment ends on 28 February 2025.
The payment was received on 27 September 2024, which falls within the 2025
year of assessment.
The “received by” principle from Geldenhuys v CIR 14 SATC 419 applies: once
the taxpayer receives an amount for their own benefit and not as agent, it is
included in gross income.
Semester 2 2025 - DUE 18 September 2025; 100% correct
solutions and explanations.
Question 1 (10 marks, 18 minutes):
Discussion
1. Definition of gross income
In terms of section 1 of the Income Tax Act 58 of 1962, gross income is defined as:
“the total amount, in cash or otherwise, received by or accrued to or in favour of a
resident, during a year of assessment, excluding receipts or accruals of a capital
nature…”
Since Moses Patel (Pty) Ltd (MP) is a South African resident company, its gross
income includes all receipts and accruals, both local and foreign, unless capital in nature.
2. Nature of the R95 000 received
The amount was received as payment for services rendered by MP’s animal
feeding supplement specialist.
According to case law (CIR v Lever Brothers & Unilever Ltd 1946 AD 441, 14
SATC 1), amounts received in exchange for services are of a revenue nature.
Similarly, in CIR v Pick ’n Pay Employee Share Purchase Trust 54 SATC 271,
it was held that amounts received in the course of carrying on business form part
of gross income.
3. Timing of inclusion
MP’s year of assessment ends on 28 February 2025.
The payment was received on 27 September 2024, which falls within the 2025
year of assessment.
The “received by” principle from Geldenhuys v CIR 14 SATC 419 applies: once
the taxpayer receives an amount for their own benefit and not as agent, it is
included in gross income.
