Question

A bank had an “encouragement to study” scheme under which payments were made to
employees who successfully completed approved courses of study. Sharpie Smith was an
employee of the bank who successfully completed an appropriate course and was accordingly
awarded $970 by the bank.

Required:
Discuss whether $970 receipt is gross income to Sharpie Smith. Support your answer with
references to case law and the Income Tax Act 2007.

Answer 1

Award money

Here this case tells about bank provide a payment offer for encouraging the study of the employees worked in the bank.Is this amount of receipt increase the the income of the employee and whether is taxable or not?,that is the question noted here .the case depicted that sharpie Smith was an employee in a bank and bank provided a benefit offer of payment for successfully completed approved course of study in accordance with encouragement to study of employees.Sharpie Smith awarded $970 by the bank.

Under the Income tax Act 2007,it is pointed that awards and winnings are always taxable in the hands of the winner. The amount of prize won ,here $970 would be recorded under the head ‘income from other sources’ and it would be subject to tax as per the provisions of Section 56(2).Awards which are not approved by the Government and prizes are taxed at certain rate of the winning amount changes in world wide and also cess would also have to be added to the tax rate .So the award money increase the gross income of Sharpie Smith and this amount of receipt calculate under the tax on income of Sharpie Smith.