Tax2601 Assignment 1 2025 – Due 7 April 2025

TAX2601/2025/S1/ Assessment 1
Due: 7 April 2025
QUESTION 1 (12 marks, 14 minutes)
Mr Xhumalo lives in Gqeberha, South Africa. He manufactures and sells various grass baskets and placemats
from a street stall. Due to the high demand for his products, he concluded a sales agreement with a wellknown
houseware
retailer
in
South
Africa.
In
terms
of
the
agreement,
the
retailer
will
purchase
R25
000
worth

of
products
from
Mr
Xhumalo
on
15
February
2025
on
credit.
The
goods
must
be
manufactured
and
delivered

by
15
March
2025,
with
payment
scheduled
for
31
March
2025.
The
agreement
clearly
states
that
Mr
Xhumalo

will
only
become
entitled
to
payment
once
he
has
delivered
the
goods.
Mr Xhumalo’s accountant is uncertain in which year of assessment the R25 000 must be declared for tax
purposes and contacted you for advice.
REQUIRED
MARKS
Discuss whether the R25 000 of the sale will constitute gross income in the hands of
Mr Xhumalo for the 2025 year of assessment.
12
Note:
• You can support the main issue in the question with relevant case law from the
module’s prescribed case law.
Tax Assignment 1 Answers
Question 1: Gross Income – Mr Xhumalo
Relevant Legislation & Case Law:
– Gross income definition: Section 1 of the Income Tax Act
– Accrual principle: People’s Stores (Walvis Bay) (Pty) Ltd v CIR (1990) – income accrues
when the taxpayer becomes unconditionally entitled to an amount.

Facts
– Mr Xhumalo sold a cabinet for R25 000.
– Cabinet was delivered on 15 March 2025.
– Year of assessment = 1 March 2024 – 28 February 2025