Khulula (Pty) Ltd (Khulula) is a South African company that manufactures and sells clothes. The company has a financial year ending on 28 February 2023. The company was established in the early 2000s and had a very strong financial result. Khulula employs delivery drivers who carry out the deliveries of its products to retail partners who then sell Khululas products directly to the final consumers. Khululas delivery drivers do not have set working hours. The drivers have to complete their deliveries during the business hours of the retail partners but once they have completed their deliveries for the day, their workday has come to an end and they are allowed to go home. Understandably, the drivers generally try and carry out their daily deliveries as quickly as possible and sometimes disobey the rules of the road in doing so. On 1 July 2022, Manqoba, one of Khululas delivery drivers was involved in an accident while out on a delivery. The accident had resulted from reckless driving on the part of Manqoba. Manqoba was also driving at a speed that was almost 30km/h above the speed limit. Manqoba sustained serious injuries because of this incident and had to take six months off work to recover from this accident. On 1 January 2023, Khulula paid Manqoba R450 000, related to the loss of income as well as a reimbursement of medical expenses incurred by himself. Khululas accountant filled the companys annual income tax returns for 2023, the accountant included R450 000 which the company paid to Manqoba in the statement of comprehensive income. In terms of assessment, the South African Revenue Service (SARS) disallowed an amount of R450 000 claimed by Khulula as a deduction. Khulula was aggrieved by an assessment and objected the assessment, but SARS disallowed the objection and claimed that Khulula was not entitled to this deduction since it was not in the production of income. Khulula filed an appeal and selected alternative dispute resolution (ADR) but the ADR proceeding was dismissed. Khulula took SARS to court, the court proceedings are scheduled to take place on 1 August 2023. The qualified judge must facilitate the proceedings. Description: In this scenario apply principles of taxation, Income Tax Act, No. 58 of 1962, and associated tax cases to prepare for court proceedings. The students will use the tax legislation and case law as supporting evidence to argue the points. Judge This person will be a facilitator of court proceedings and keep track of time. The judge will be the head of a courtroom and make sure that the hearing is fair. Before the start of the hearing, the judge must give each party an opportunity to lay out what they will be arguing, and which information will be used as supporting information in their arguments. You must assume that this student is fit and proper to be a judge. The judge must listen to both arguments and facts presented by SARS and the taxpayer (Khulula), and apply the law (case law) to make a fair and just decision. Before the judge makes a ruling, each side (taxpayer & SARS) must be given a chance to provide a summary of arguments the judge heard and offer their opinion on the reasons the judge has to rule in their favor. The judge must make his or her ruling considering precedent/principle or rule established in a previous case involving identical or similar facts. The Judge must write a judgment with the assistance of observers.

SARS-Commissioner This person must prepare and present the SARS case at the court. Your aim is to convince the taxpayer that the amount of R450 000 is not allowed as a deduction and cannot be claimed. All your arguments must be put forward verbally in court. Your argument must be supported by tax legislation and case law. The SARS must make an opening statement that lays out what he/she will be arguing, and which supporting information he/she will use in his argument. After all parties (SARS & taxpayer) have made their argument, the SARS will have a chance to give a summary of the argument the judge heard and offer his opinion on the reasons that the judge must rule in his favour.

The taxpayers (Khulula) This person must prepare and present the taxpayers case to the court. Your aim is to convince the court that the amount of R450 000 is allowed as a deduction. Your argument must be supported by tax legislation as well as relevant case law. The taxpayer must make an opening statement that lays out what the taxpayer will be arguing, and which supporting information he/she will use in his or her argument. After SARS and taxpayers have made their arguments, the taxpayer will have a chance to give a summary of the arguments the judge heard and offer his opinion on the reasons that the judge must rule in his favour. All your arguments must be put forward verbally. Observers -The observers must listen to each side of the disagreement and help the judge make a decision on how the dispute will be settled. -The observers must listen to the case and help the judge to make a decision. The observers must assist the judge in writing a judgment.