PetJoy CC retails products and accessories used for pet animals. It is a resident of the republic. Its financial year ends on the last day of February. It is a small business corporation. Its sole member is Dinu Zamran, also a resident of the Republic. PetJoy CC moved to a new retail premises during its 2022 year of assessment since its previous premises had become too small for its operations. PetJoy CC made a net income for its year of assessment of R175 000 before taking into account the following: On 01 March 2021, it entered into a lease agreement with Bamboo Boom (Pty) Ltd whereby it would lease a site from them for 20 years. The agreement provided for an initial premium of R30 000 to be paid by PetJoy CC to Bamboo Boom (Pty) Ltd on the commencement of the lease (on 01 March 2021). a monthly rental of R1 000 to be paid by PetJoy CC to Bamboo Boom (Pty) Ltd to be increased by R200 a month after every completed year of the lease payable, and an obligation on PetJoy to erect a retail premises on the leased site at a cost of R1 160 000

the erection of the retail premises commenced on 1 March 2021. They were completed at a cost of R1 260 000 on 31 October 2021. Trading in them by PetJoy CC commenced on 1 November 2021. On a portion of the leasehold property was a dilapidated house. This house was demolished during April 2021. The area was then converted into parking bays for PetJoy CCs customers and employees. It incurred R21 000 in demolishing the house. On 31 May 2021, Miranda Dirham, a teller, employed by PetJoy CC was caught with her fingers in the till (pinching money) and was encouraged to resign with immediate effect. Its auditors established that R25 000 was missing from the takings for the month. No funds have been recovered. After Miranda Dirhams resignation, it was discovered that the locking device to PetJoy CCs till was damaged. It could not be repaired. It was therefore abandoned on 31 May 2021. Its tax value on 31 May 2021 was R1 600. It had originally cost R9 600. On 01 July 2021, Omani Rials, an employee of PetJoy CC, had borrowed R10 000 interest free from it. After repaying half his interest free loan from it (R5 000), he did not return to work on 30 November 2021. He cannot be traced. Mike Harvey Law Inc. a firm of attorneys, was engaged by it to recover the R5 000 balance of his interestfree loan from it. Although Mike Harvey Law Inc. has not recovered any money, on 28 February 2022, it billed PetJoy CC R1 000 for the costs that it had incurred to date.

On 1 December 2021, a gondolier belonging to PetJoy CC and used by it in its shop collapsed and broke both the legs of a customer. Under the court order that followed, it had to pay compensation and damages of R11 800 to this customer. Meghan Markle, an advocate, was paid R13 200 by it on 31 January 2022 for his services relating to the above matter. As a result of the accident, Devi David, another employee of PetJoy CC, who was close to its gondolier when it collapsed, retired on 31 December 2021, on account of ill health. It now awards Devi David a monthly amount of R2 500. The first award was made by it to her in January 2022. It does not have a practice of making awards of this nature. During January 2022 PetJoy CC participated in a trade fare. The cost of its exhibition was R10 600. PetJoy CCs net income after taking into account the following amounts that had accrued to it: Local dividends from listed companies of R18 000. Local interest of R12 000 from an investment in debentures in a local listed company. It is not a tax free investment. A distribution from a real estate investment of R4 000 made up of local dividends of R3 900 and local interest of R100. A distribution of R6 000 from a collective investment scheme in securities (a so-called equity unit trust) made up of R5 300 and local interest to the extent of R700. It is the policy of PetJoy CC to declare a dividend once a year. It declares this dividend on the last day of its year of assessment. PetJoy CC declared a dividend of R37 500 on 28 February 2022. You are required to determine PetJoy CCs 1. Normal tax liability for its year of assessment that ended on 28 February 2022. Please provide detailed reasoning for including in or excluding line items from taxable income. (45) 2. The dividends tax it deducted from the dividend it declared on 28 February 2022. (5)