Buffalo $($Pty$)$ Ltd manufactures a variety of African beers. The company has provided you with the following background in respect of the enterprise: Its manufacturing activities have been approved by SARS as a qualifying process of manufacture. The company is not a small business corporation as defined in the Income Tax Act, $1962($Act $58$ of $1962),$ as amended. Its financial year ends on the last day of February. Buffalo is a registered VAT vendor making only taxable supplies. Where needed, Buffalo obtained valid tax invoices and the required documentation for all its transactions. All amounts exclude VAT where applicable, unless specifically stated otherwise. The companys gross profit and other income, before other expenses is presented as follows: Extract of statement of profit or loss and other comprehensive income for the year ended $28$ February $2022$: Notes Sales Cost of sales $1$ R $97500002(4029570)$ Gross profit $5720430$ Other income $50000$ Interest received Total income Notes: $1.35000057774305\%$ of the sales amount reflected above, were returned. The adjustment for these returns has been made to the cost of sales account only, in the statement presented above. $2.$ Cost of sales, all at cost price, was determined as follows: Opening stock Add: Purchases Less: Closing stock R $17192805626000(3315710)4029570$ The market value for the opening stock was R$1650000$ on $1$ March $2021$ and the market value for the closing stock was R$3400000$ on $28$ February $2022.3.$ Interest was received from a fixed deposit with Afreak Bank $($a local South African Bank$).$

PART B Further to the above, you were furnished with the following in respect of additional expenses incurred by Buffalo during the year ended $28$ February $2022.$ Expenses have been listed in alphabetical order. $1.2.3.4.$ Annuity $$ R$16000$ Buffalo paid an annuity to Lebogang, the widow of a deceased employee of Buffalo. Depreciation $$ R$94625$ a$.$ b$.$ c$.$ Equipment purchased for an amount of R$1293750($including VAT$)$ at the start of January $2022$ was brought into use on the same day. The equipment was not used as part of the process of manufacture. A delivery van was purchased for R$168000$ on the same day as the equipment referred to in $2($a$)$ above, for making deliveries to clients. It was however, only brought into use on $1$ February $2022$; and A yeast extraction machine, a machine used directly in the manufacturing process, was purchased secondhand for an amount of R$190000$ on $1$ March $2020.$ Transport and installation costs amounted to R$9790$ and R$3960$ respectively. The machine was first brought into use on $1$ May $2020.$ Donation $$ R$450000$ The donation was paid to a local Old Age Home. A valid section $18$A receipt was received. No marketing benefit will be obtained from the donation. Lease premium and lease expenses $$ R$170000$ Buffalo commenced leasing a commercial building for selling directly to the public. The details of the lease agreement are: $$ Commencement date on $1$ April $20215-$year period, with an optional extension period of another two years. $$ Lease premium, for right of use of property for R$84000,$ paid on $1$ May $2021.$ Buffalo agreed to improvements on the premises to the value of R$222000$ and paid a monthly rental amounting to R$12500,$ starting $1$ May $2021.$ The building improvements commenced on $1$ May $2021$ and were completed and brought into use on $1$ January $2022.$ The total cost of the improvements was R$205000.$

The amount of the lease improvement constitutes income in the hands of the lessor. $5.6.7.$ Penalties $$ R$12105$ Buffalo paid penalties for the late submission of tax returns to SARS. Restraint of trade payment agreement $$ R$1000000$ A former director of the company resigned $31$ December $2021$ and was paid a restraint of trade amount. The director contractually agreed not to associate with any competitor for a five$-$year period from $31$ December $2021.$ Salaries and bonusses $$ R$850000$ Salaries included a performance bonus payment to production staff for exceeding the sales and production targets and was paid on $28$ February $2022.$ Additional information: Binding General Ruling: No$.7$ lists the following write$-$off periods: o o Non$-$manufacturing equipment: Delivery vehicles: REQUIRED $$ PART B $5$ years $4$ years Calculate the income tax liability of Buffalo $($Pty$)$ Ltd for its $2022$ year of assessment. Provide brief reasons for each of the amounts excluded from your calculation. Ignore any Capital Gains Tax $($CGT$)$ effects.