Manufac (Pty) Ltd (Manufac) has a December financial year-end. Manufac made use of a specific design for the manufacturing of one of its products. In 2020, ABC Ltd (ABC) alleged that Manufac infringed on a design of a similar product (used it without permission) usually manufactured by ABC. During 2021 Manufac and ABC entered into mediation and it was formally agreed that Manufac will compensate ABC for the loss of sales it suffered due to this infringement. An agreement was concluded on 15 November 2021 with a settlement amount of R352 000 to be paid by Manufac to ABC for the loss of sales suffered by ABC. Manufac only paid the R352 000 on 10 January 2022.

 

REQUIRED: 

MARKS Discuss whether the R352 000 will be deductible by Manufac (Pty) Ltd in terms of the general deduction formula,23(g)) of the Income Tax Act and if deductible, in which year of assessment. List all the requirements of the general deduction formula and briefly discuss each requirement using the given information at hand. Make brief references to relevant case law to support your answer