, PLEASE USE THIS DOCUMENT AS A GUIDE TO ANSWER YOUR ASSIGNMENT
QUESTION 1
1. Discuss, whether the amount of R95 000 received by Moses Patel (Pty) Ltd 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.
To determine whether the amount of R95,000 received by Moses Patel (Pty) Ltd (MP) will be
regarded as gross income for the 2025 year of assessment, consider the provisions of the Income Tax
Act, 1962 ("the Act") and relevant case law principles.
1. Gross Income Definition (Section 1 of the Income Tax Act)
Gross income is defined in Section 1 of the Income Tax Act as:
"the total amount, in cash or otherwise, received by or accrued to or in favour of a taxpayer,
excluding any amount of a capital nature."
For an amount to be included in gross income, the following conditions must be met:
The amount must be received by or accrue to the taxpayer.
It must not be of a capital nature.
It must relate to the taxpayer's income-generating activities.
2. Nature of the R95,000 Payment
The R95,000 payment is made for services rendered by MP’s animal feeding supplement specialist.
The amount was received in cash for consulting services provided to a commercial farmer.
According to the facts, MP provides specialized knowledge and advice to farmers regarding
cost-effective feeding supplements. The key factor here is that the payment is for services rendered
rather than the sale of goods.
3. Nature of the Payment (Revenue vs. Capital Nature)
The amount of R95,000 is not of a capital nature, as it relates to an income-producing activity (the
provision of consulting and expertise in the field of animal feed supplementation). According to the
case law in Joffe v Commissioner for Inland Revenue, payments made in exchange for services
rendered or for income-generating activities are considered revenue receipts, as opposed to capital
receipts. Therefore, this payment will be regarded as revenue in nature.
4. Case Law Principles
In C:SARS v. Welz (2006), the court emphasized that a payment for services rendered is
generally regarded as income, even if it is a lump sum or received in advance.
Similarly, in Case No. 10860 (1985), it was held that income derived from services is part of
the gross income of the taxpayer, unless specifically excluded.
In this case, the R95,000 is payment for specialized consulting services related to animal feed
supplements, which are clearly revenue-producing in nature.
QUESTION 1
1. Discuss, whether the amount of R95 000 received by Moses Patel (Pty) Ltd 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.
To determine whether the amount of R95,000 received by Moses Patel (Pty) Ltd (MP) will be
regarded as gross income for the 2025 year of assessment, consider the provisions of the Income Tax
Act, 1962 ("the Act") and relevant case law principles.
1. Gross Income Definition (Section 1 of the Income Tax Act)
Gross income is defined in Section 1 of the Income Tax Act as:
"the total amount, in cash or otherwise, received by or accrued to or in favour of a taxpayer,
excluding any amount of a capital nature."
For an amount to be included in gross income, the following conditions must be met:
The amount must be received by or accrue to the taxpayer.
It must not be of a capital nature.
It must relate to the taxpayer's income-generating activities.
2. Nature of the R95,000 Payment
The R95,000 payment is made for services rendered by MP’s animal feeding supplement specialist.
The amount was received in cash for consulting services provided to a commercial farmer.
According to the facts, MP provides specialized knowledge and advice to farmers regarding
cost-effective feeding supplements. The key factor here is that the payment is for services rendered
rather than the sale of goods.
3. Nature of the Payment (Revenue vs. Capital Nature)
The amount of R95,000 is not of a capital nature, as it relates to an income-producing activity (the
provision of consulting and expertise in the field of animal feed supplementation). According to the
case law in Joffe v Commissioner for Inland Revenue, payments made in exchange for services
rendered or for income-generating activities are considered revenue receipts, as opposed to capital
receipts. Therefore, this payment will be regarded as revenue in nature.
4. Case Law Principles
In C:SARS v. Welz (2006), the court emphasized that a payment for services rendered is
generally regarded as income, even if it is a lump sum or received in advance.
Similarly, in Case No. 10860 (1985), it was held that income derived from services is part of
the gross income of the taxpayer, unless specifically excluded.
In this case, the R95,000 is payment for specialized consulting services related to animal feed
supplements, which are clearly revenue-producing in nature.
