Provisions as per IT acts

Dr  Damaged stock - income statement

Cr. Provision 3% - liability for this year

So is this expense a tax allowable expense ie, will we get a tax relief due to this? 

No , provisions are disallowed by the department on the ground that , they are Contingent in nature and not actually incurd .you Can refer some Case laws .

where some time disallowed by the Honorable  Supreme Court  / High Court and some time allowed depends on nature of Case .

Disallowed in Case of
1) Calcutta Company Ltd Vs CIT
2) E. Minerals India Pvt Ltd vs JCIT
3) TRF Ltd vs CIT

Allowed in Case of
1)Luke India PVT LTD vs CIT
2) Indian transformer vs CIT
3) Bank of Bahrain  & Kuwait vs DCIT

Naturally correct. Provision for future operating losses is not allowed as per the standard. But the damage occured during WIP. People can misunderstand this for an operating activity. Then waste in WIP  is added back to finished stock.