Hilary: Lump sum from Bernies Bakery:
As per definition of Section 1: Gross Income in the Income Tax Act: any amount that is received by a taxpayer in respect of services rendered or by virtue of any employment of holding any office will form part of the taxpayers gross income and be included and taxable as per the tax tables.
The amount of R10 000 received by Hilary was received in the year of assessment, the value is in monetary terms (cash amount of R10 000), she received the amount unconditionally (unconditional entitlement: it was hers in the year of assessment and benefited her in the year of assessment), and she would have not received that amount had she not been employed by the Bakery. The relationship of Hilary to the Bakery 's…show more content… The intention stated was to 'sell the ovens at a profit ' and not simply to achieve the greatest gains possible. The effect of this is that the old ovens will be de recognized as capital assets and treated as accordingly with Capital Gains Tax(not further discussed) and will then be required as trading stock, at the value it was acquired for (the old cost price plus repair costs undertake to repair it). The amount will be included as a S23(3) in terms of the income-tax' class='brand-secondary'>Income Tax Act, and any compensation received in the year of assessment or in the future years of assessment, will be received and included in Gross Income(in terms of not of a capitals nature: Section…show more content… This principle comes from Joffee & Co (Pty) Ltd c CIR (1946 AD), where the taxpayers trade was carried on by engineers reinforcing concrete. The construction collapsed resulting in damages paid to an injured employee. The court held that the construction of buildings should not result in them collapsing as an 'inevitable con commitment ' and will not form part of the trade carried on, therefore will not be deductible.
A similar case, ITC 49 (1926) a ya payer sold petrol lamps and the result of one of them exploding met the definition of s deduction- the trade to be carried on could result in the explosiveness of the lamp due to the nature of the business and was in fact an inevitable concomitant of the business type. The damages were