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Six case studies follow:

Ralph Blue, the local hairdresser, paid damages to Violet and Magenta. Violet and Magenta are customers of Ralph. Both suffered injuries as a result of Ralphs faulty equipment. Violet was burnt by a hairdryer, while Magenta suffered an electric shock. Smith and Alan

Smith and Alan, a firm of attorneys, paid compensation to a client for the maladministration of a deceased estate.

Jay Naidoo, the sole proprietor of Pineville Supermarket, was fined for contravening price control regulations. He seeks to deduct the fine for normal tax purposes from the profits made by his supermarket.

Anil Chetty's Compensation was paid to one of his customers by Anil Chetty (the owner of a dry-cleaning business), for the loss of two suits that had been entrusted to his care by this customer.

Rainbow Construction Limited Ten years ago, Rainbow Construction Limited erected a block of flats for a client in accordance with the clients specifications. The block was completed and handed over to the client. Rainbow Construction Limited was duly paid the contract consideration. During its 2020 year of assessment the external walls of the block revealed dampness. It was then discovered that the walls had not been built according to building regulations. The client instituted an action against Rainbow Construction Limited for damages. Rainbow Construction Limited settled the damages. It now wishes to claim them as a deduction for normal tax purposes.

Neville Louw is involved in the retailing of gas and petrol lamps. He recently sold a lamp to Byrne under a guarantee. This particular lamp exploded, causing injuries to Byrne. Neville then paid damages to Byrne.

Required: In each of the above situations, discuss, giving full reasons, whether the expenditure would be deductible from the respective taxpayers income.

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