Jumping Castle Factory (Pty) Ltd (JCF) is a company that manufactures large jumping castles and water slides. They earn income from the sale and hiring out thereof. The company is a small business corporation as defined in the Income Tax Act. The companys year of assessment ends on 28/29 February and your tasks relate to the taxable income calculation of the company for the year of assessment ending 28 February 2023. During a meeting between you and the accountant, the following issues are brought to your attention: Issue 1: The company has a few rental agreements with some of their customers, where a monthly rental is paid by the customer to hire jumping castles for a fixed period. In terms of the rental agreements a specified monthly rental amount is payable on or before the seventh (7th) day of the relevant month of use. That is, if an amount is paid by the (7th) of June, it is then for the use of the item for the month of June. One of JCFs customers hired a jumping castle for three months for a monthly amount of R7 000. The customer deliberately paid an amount of R21 000 into JCFs bank account on 5 February 2023, which is the rental for February 2023 to April 2023. The accountant is uncertain how to account for the R21 000 rental income received in the taxable income calculation.

Write a short paragraph for your manager to review before presenting it to the client. In your paragraph you must discuss and conclude whether the receipt of the R21 000 rental income would constitute gross income of JCF (Pty) Ltd for the year of assessment ending 28 February 2023, by addressing only the received by or accrued to requirement of the gross income definition as defined in the Income Tax Act. Also briefly refer to the relevant case law to strengthen your argument. [5 marks]