Medicraft $($Pty$)$ Ltd is a manufacturer of medical devices, regarded as a process of manufacture by the South African Revenue Service. The company is in the process of establishing itself and expanding its product offering. The information below relates to the company$$s year of assessment ending on $30$ April $2024$:

$1)$ Medicraft $($Pty$)$ Ltd earned revenue of R$4300000$ from the sale of medical devices.

$2)$ The purchase of raw materials amounted to R$1120000$ during the year of assessment. $30\%$ of these purchases were made on credit and the company was charged an additional amount of interest of R$15700$ by one of the suppliers due to late payment.

$3)$ The inventory balances, correctly valued in terms of Section $22$ of the Act, were as follows: $01$ May $2023$ R$185000$

$30$ April $2024$ R$260000$

$4)$ Total administration expenses comprised of the following:

$$ R$326000$ paid to employees in relation to their salaries.

$$ R$125000$ paid to the company$$s pension fund on behalf of its employees.

$$ On $1$ January $2024$ Medicraft $($Pty$)$ Ltd entered into an agreement with its sales

manager stipulating that he would not provide his services to any of its competitors for a period of two years. Medicraft paid an amount of R$186000$ to the sales manager as specified in the agreement.

$5)$ The company had a debtor$$s list of R$48900$ on $30$ April $2024.$ R$13650$ were outstanding for less than $60$ days, R$12500$ were aged $61120$ days and R$22750$ were older than $120$ days. The company does not apply IFRS $9.$ The commissioner had allowed a section $11($j$)$ allowance of R$23000$ in the prior year.

$6)$ Medicraft $($Pty$)$ Ltd entered into a lease agreement with Proprop Ltd on $1$ May $2021$ for its factory. The company paid a lease premium of R$120000$ for a lease period of $15$ years. The annual rental of R$144000$ is fixed for the lease period.

On $31$ October $2023,$ Medicraft $($Pty$)$ Ltd purchased part of a new office block for R$950000$ to be used as its administration offices.

$7)$ A second$$hand manufacturing machine was acquired and put into use by Medicraft $($Pty$)$ Ltd on $1$ March $2023$ for R$360000.$ However, it began to experience malfunctions due to power outages. Consequently, Medicraft $($Pty$)$ Ltd decided to sell the machine for R$200000$ on $1$ August $2023.$

$8)$ On $1$ January $2024,$ the company paid R$32000$ to lease a billboard advertising their products for a period of a year.

$9)$ Medicraft $($Pty$)$ Ltd submitted their $2022$ IT$14$ tax return late to SARS and was charged penalties amounting to R$1000$ on $15$ May $2023.$

$10)$

Medicraft $($Pty$)$ Ltd researched and developed a completely new product to help with measuring blood insulin levels. Research on the new product commenced on

$1$ September $2023$ when the required approval for the project was obtained.

From $1$ September $2023$ to $30$ April $2024$ operating research costs amounted to R$125000$ and salaries paid to administrative staff amounted to R$150000.$ Medicraft $($Pty$)$ Ltd purchased a new manufacturing machine for R$400000$ to be used solely in the manufacturing of this new product. The company funded the research project.

In terms of Section $11$D of the Income Tax Act, the following may be claimed in respect of research and development:

$$ A deduction equal to $150\%$ of expenditure incurred directly for research and development.

$$ An accelerated depreciation deduction $($that is$,50$:$30$:$20)$ for capital expenditure incurred on machinery or plant used for research & development and buildings or improvements at $5\%$ per year.

$$ The Department of Science and Technology must approve the entire $150\%$ deduction. Only expenditure incurred on or after the date of receipt of the application is eligible for this deduction.

$11)$ The company purchased a patent at a cost of R$80000$ on $1$ February $2024$ and brought it into use at the same date. The company also renewed its trademark registration on $16$ February $2024,$ at a cost of R$11000.$

$12)$ Medicraft $($Pty$)$ Ltd donated R$30000$ to a local church and received the relevant section $18$A

certificate.

$13)$ Medicraft $($Pty$)$ Ltd incurred an assessed loss of R$120000$ during the $2023$ year of assessment.

Required:

Q$\mathrm{.}3\mathrm{.}1$ Discuss what amount $($if any$)$ of the R$186000$ Medicraft $($Pty$)$ Ltd will be entitled to claim as a deduction for their year of assessment ending $30$ April $2024($see note $4).$

Show all calculations applicable to your discussion. $(10)$

Q$\mathrm{.}3\mathrm{.}2$ Calculate the normal tax payable by Medicraft $($Pty$)$ Ltd for its year of assessment ended $30$ April $2024.$

Round your final answers to the nearest rand.

Provide brief reasons for any nil effects. Marks will be allocated. $(25)$