Name one case law principle that can be used in a discussion where this issue is "In the Production of Income"

 

b) Prepaid expenditure may be deducted in the current year of assessment when the goods/ services are all received within what time period after the year of assessment?

 

c) Discuss the tax consequences for Waverly Place Sandwiches of the remuneration package in the 2023 year of assessment.

 

Scenario:

"Waverly Place Sandwiches Limited ("Waverly Place") is a fast food takeaway shop established on Bree Street, Cape Town in 2016. Waverly Place's financial year end is 30 June.

Waverly Place has three employees who each earn a salary of R15 000 per month.

On the 1st of February 2023, Waverly Place created an incentive scheme for its employees whereby they would each be entitled to 5% of revenue in excess of R 750 000 generated over a six-month period.

 

Waverly Place's expected revenue for the period 1 February 2023 to 31 July is R 850 000.

Waverly Place generates Revenue evenly throughout the year.
 

Appendix A - Extract for the Income Tax Act
11. For the purpose of determining the taxable income derived by any person from carrying o trade there shall be allowed as deductions from the income of such person so derived 

 

(a) expenditure and losses actually incurred in the production of the income provided such
expenditure and losses are not of a capital nature;

23. Deductions are not allowed in the determination of taxable income. • No deductions shall, in any case, be made in respect of the following matters namely-

(g) any moneys, claimed as a deduction from income derived from trade, to the extent to which such moneys were not laid out or expended for the purposes of trade:"

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