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Rent-a-car (Pty) Limited, a car-hire business, paid damages of R15 000 to a customer. The claim arose due to a fault in a hired car that was involved in an accident. The customer had suffered injuries and had claimed damages of R15 000. On the advice of its legal adviser, Rent-a-car (Pty) Limited, had not disputed the claim, but merely settled the claimed amount of damages. Legal costs incurred were R2 500.
State whether the R15 000 damages paid and the R2 500 legal expenses incurred would be deductible in the determination of its taxable income.
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