Ten years ago Hard Hats Construction Limited erected a block of flats for a client in accordance with the client's specifications. The block was completed and handed over to the client. The contract consideration was settled in full. During Hard Hats Construction Limited's 2020 year of assessment the external walls of the block revealed dampness. It was then discovered that the walls had not been built according to specifications. Its client instituted an action against it for damages. 

 

Required:

Determine, giving full reasons, whether the expenditure would be deductible from the respective taxpayer's income.

Answer rating: 100% (QA)

In this scenario the deductibility of the expenditure depends on the nature of the expenses incurred ... View the full answer