LML4804 Assignment 1.
Name: Ntokozo Ronald Mabuya
Student Num:
Unique code:
Module: LML4804
Question 1
A. Section 1 of the Income Tax Act defines gross income. Gross income in relation to any year
or period of assessment, means: in the case of any resident the total amount in cash,
receiv...
A. Section 1 of the Income Tax Act defines gross income. Gross income in relation to any year
or period of assessment, means: in the case of any resident the total amount in cash,
received by or accrued to in favour of such resident during such year or period of
assessment. In the case of any other person other than a resident the total amount in cash
or otherwise, received by or accrued to or in favour of such person from a source within or
deemed to be within the Republic, excluding receipts or accruals of a capital nature but
including such amounts so received or accrued as described hereunder [paragraphs (a) to
(b)].
It is essential to establish if Mrs Botha is a resident or a non-resident. This is because the
word wide receipts received by a residents are included in their in their gross income. The
tests used to determine if a person is a resident or a non-resident are the ordinarily resident
test and the physical presence test. The physical presence test is used if a natural person is
does not qualify as a resident in terms of the ordinarily resident test.
According to the ordinarily resident test a person is ordinarily resident in the country if that
person for example lives in South Africa, their family is in the republic & everything they own
is in the republic. In the Cohen case the court held that a person ordinary residence would
be the country to which he would naturally as a matter of course return to from his
wanderings.
According to the physical presence test a tax payer who is not during the period of
assessment ordinarily resident will still be regarded as a resident if she/he is physically
present in the Republic for a certain period of time.
The physical presence test applies to tax payers who are not ordinarily resident but
physically present for a period /periods:
Exceeding 91 days in aggregate during the current year of assessment & exceeding 91 days
in aggregate during each of the preceding 5 years of assessment & exceeding 915 days in
aggregate during the preceding 5 years. Based on the above mentioned case it is clear that
Mrs Botha is a resident because she satisfies the ordinarily residence test
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