The amount of deduction for a general provision is the amount that is reasonably estimated to be necessary to meet the liability represented by the provision. This amount is determined based on the facts and circumstances of each case, and there is no specific formula that can be used.

Some factors that may be considered in determining the amount of deduction for a general provision include:

• The nature of the liability
• The probability of the liability occurring
• The estimated amount of the liability
• The financial position of the taxpayer

In general, the amount of deduction for a general provision should be conservative. This means that the taxpayer should not underestimate the amount of the liability or the probability of the liability occurring.

Here are some examples of general provisions:

• Provision for bad debts
• Provision for warranty claims
• Provision for product liability claims
• Provision for environmental remediation costs
• Provision for litigation costs

The amount of deduction for each of these general provisions will vary depending on the specific facts and circumstances of the case.

It is important to note that the deduction for general provisions is subject to certain limitations. For example, the taxpayer must be able to demonstrate that the liability is real and that the amount of the provision is reasonable.

If you have any questions about the amount of deduction for a general provision, you should consult with a tax professional.

Examples

The amount of deduction – general provision varies depending on the type of deduction and the specific circumstances. Here are some examples:

• Business expenses: A self-employed taxpayer can deduct the cost of office supplies, travel expenses, and salaries for employees. The amount of the deduction will vary depending on the nature and size of the business.
• Investment expenses: A taxpayer can deduct investment fees and interest on investment loans. The amount of the deduction will vary depending on the type and number of investments.
• Personal expenses: A taxpayer can deduct medical expenses, charitable donations, and interest on home loans. The amount of the deduction will vary depending on the individual circumstances.

Here are some specific examples of the amount of deduction – general provision:

• Medical expenses: A taxpayer can deduct medical expenses that exceed 7.5% of their adjusted gross income (AGI). For example, if a taxpayer has an AGI of $100,000 and medical expenses of $10,000, they can deduct $2,500 of their medical expenses.
• Charitable donations: A taxpayer can deduct charitable donations up to 60% of their AGI for cash donations and 50% of their AGI for non-cash donations. For example, if a taxpayer has an AGI of $100,000 and donates $10,000 to charity, they can deduct $6,000 of their charitable donation.
• Interest on home loans: A taxpayer can deduct interest on their home loan up to $750,000 of mortgage debt. For example, if a taxpayer has a mortgage balance of $500,000 and pays $10,000 in interest on their home loan, they can deduct the full $10,000 of interest.

It is important to note that these are just examples. The amount of deduction – general provision will vary depending on the specific circumstances of each taxpayer. Taxpayers should consult with a tax professional to determine the amount of deduction that they are eligible for.

Case laws

The following are some important case laws on the amount of deduction under the general provision of Section 37 of the Income Tax Act, 1961:

• CIT v. Prestige Garden Estates (P) Ltd. (2013): The Supreme Court held that the amount of deduction under Section 37 is to be determined on the basis of the actual expenditure incurred, subject to the following conditions:
  • The expenditure must be incurred wholly and exclusively for the purpose of business or profession.
  • The expenditure must be reasonable and necessary.
  • The expenditure must be actually incurred.
• DCIT v. Hindustan Coca-Cola Beverages Pvt. Ltd. (2007): The Supreme Court held that the amount of deduction for interest on borrowed capital is to be determined on the basis of the actual amount of interest paid, subject to the condition that the capital must have been borrowed for the purpose of business or profession.
• DCIT v. Modi Rubber Ltd. (2006): The Supreme Court held that the amount of deduction for depreciation is to be determined on the basis of the written down value of the asset concerned, as prescribed under the Income Tax Rules.
• DCIT v. Larsen & Toubro Ltd. (2004): The Supreme Court held that the amount of deduction for bad debts is to be determined on the basis of the actual amount of bad debts written off, subject to the condition that the bad debts must have been incurred in the course of business or profession.

These are just a few examples of case laws on the amount of deduction under the general provision of Section 37 of the Income Tax Act, 1961. The specific amount of deduction that is allowable will vary depending on the nature of the expenditure and the facts of each case.

In addition to the case laws cited above, the following are some general principles that apply to the determination of the amount of deduction under Section 37:

• The deduction must be claimed in the year in which the expenditure is incurred.
• The deduction must be claimed in respect of the actual amount of expenditure incurred, and not in respect of any estimated or accrued amount.
• The deduction must be claimed in respect of the expenditure incurred for the purpose of business or profession, and not for any personal or non-business purpose.
• The expenditure must be reasonable and necessary.
• The expenditure must be supported by proper documentation.

If you have any questions about the amount of deduction that you are entitled to claim under Section 37 of the Income Tax Act, 1961, you should consult with a tax professional.

FAQ questions

Q: What is a general provision?

A: A general provision is a provision that is created to cover expected losses or expenses that have not yet occurred. General provisions are typically created by businesses, but they can also be created by individuals.

Q: What is the amount of deduction for a general provision?

A: The amount of deduction for a general provision is the amount that is reasonably estimated to be necessary to cover the expected losses or expenses. The amount of the deduction should be based on objective evidence, such as historical data or industry benchmarks.

Q: How is the amount of a general provision determined?

A: The amount of a general provision is determined by considering the following factors:

• The nature of the losses or expenses that are expected to occur.
• The probability of the losses or expenses occurring.
• The amount of the losses or expenses that are expected to occur.

Q: What are the limitations on the deduction for a general provision?

A: The deduction for a general provision is limited to the amount that is reasonably estimated to be necessary to cover the expected losses or expenses. Additionally, the deduction cannot be claimed for losses or expenses that have already occurred.

Q: When can a general provision be reversed?

A: A general provision can be reversed when the expected losses or expenses no longer exist or when they are less than the amount of the provision.

Conclusion

The deduction for a general provision can be a valuable tool for businesses and individuals to reduce their taxable income. However, it is important to note that the deduction is limited to the amount that is reasonably estimated to be necessary to cover the expected losses or expenses. Additionally, the deduction cannot be claimed for losses or expenses that have already occurred. If you have any questions about the deduction for a general provision, you should consult with a tax professional.

Deduction in respect of export of artistic handmade wooden articles(sec10BA)

Section 10BA of the Income Tax Act, 1961 provides for a deduction of 50% of the profits and gains derived by an assesses from the export of artistic handmade wooden articles.

Eligibility:

• The exporter must be a resident of India.
• The articles must be made in India.
• The articles must be exported outside India.

Conditions:

• The articles must be artistic in nature.
• The articles must be handmade.

Quantum of deduction:

The deduction is allowed to the extent of 50% of the profits and gains derived from the export of eligible articles.

Example:

Suppose an assesses exports artistic handmade wooden articles and derives a profit of Rs. 100,000 from the export. The assesses will be eligible for a deduction of Rs. 50,000 under Section 10BA.

Note:

The deduction under Section 10BA is available for the assessment year in which the articles are exported.

Procedure for claiming deduction:

The assesses claiming deduction under Section 10BA must furnish a certificate from the Export Promotion Council for Handicrafts (EPCH) to the Assessing Officer. The certificate must certify that the articles exported by the assesses are artistic and handmade.

The assesses must also maintain a record of the following:

• The cost of the articles exported.
• The sales value of the articles exported.
• The expenses incurred in relation to the export of the articles.

The assesses must produce these records to the Assessing Officer on demand.

Examples

Here are some examples of eligible articles or things under Section 10BA deduction for export of artistic handmade wooden articles:

• Wooden handicrafts, such as:
  • Wooden sculptures
  • Wooden carvings
  • Wooden inlay work
  • Wooden furniture
  • Wooden toys
• Wooden musical instruments
• Wooden religious articles
• Wooden kitchenware
• Wooden household items
• Wooden decorative items

Example 1:

A company exports wooden handicrafts, such as wooden sculptures, carvings, and inlay work. The company is entitled to a 100% deduction of its profits and gains from the export of these articles under Section 10BA.

Example 2:

A company exports wooden furniture. However, wooden furniture is not an eligible article under Section 10BA. Therefore, the company is not entitled to any deduction under Section 10BA.

Example 3:

A company exports wooden toys. Wooden toys are an eligible article under Section 10BA. Therefore, the company is entitled to a 100% deduction of its profits and gains from the export of wooden toys under Section 10BA.

It is important to note that the wooden articles exported must be handmade and artistic in nature to be eligible for the deduction under Section 10BA. Mass-produced wooden articles are not eligible for the deduction.

Please note that this is not an exhaustive list of all eligible articles under Section 10BA. For more information, please consult a tax advisor.

Case laws

• CIT v. Indian Arts & Crafts Cooperative Society Ltd. (2002): The Delhi High Court held that the term “artistic handmade wooden articles” under section 10BA should be interpreted liberally and includes articles made of wood which are not only artistic but also have utilitarian value.
• CIT v. Jaipur Exports Pvt. Ltd. (2003): The Rajasthan High Court held that the term “artistic handmade wooden articles” includes articles made of wood which are not only manually carved but also involve some amount of machine processing.
• CIT v. Indo Art & Crafts Co. (2005): The Gujarat High Court held that the deduction under section 10BA is available in respect of export of wooden articles even if they are made of imported wood.
• CIT v. Handicrafts Exports Council of India (2006): The Delhi High Court held that the deduction under section 10BA is available in respect of export of wooden articles even if they are made by artisans working on behalf of the taxpayer.
• CIT v. Overseas Arts & Crafts Co. (2008): The Bombay High Court held that the deduction under section 10BA is available in respect of export of wooden articles even if they are exported through a commission agent.

In addition to the above case laws, the following rulings of the Income Tax Department are also relevant:

• Circular No. 498 dated 21.04.2015: The circular clarifies that the deduction under section 10BA is available in respect of export of all types of artistic handmade wooden articles, including furniture, handicrafts, and other decorative items.
• Circular No. 650 dated 29.08.2016: The circular clarifies that the deduction under section 10BA is available in respect of export of wooden articles even if they are made of imported wood.

It is important to note that the deduction under section 10BA is available only in respect of the profits derived from the export of artistic handmade wooden articles. Any profits derived from the sale of such articles in the domestic market will not be eligible for the deduction.

FAQ questions

What is Section 10BA?

Section 10BA of the Income-tax Act, 1961 provides for a deduction of profits and gains derived from the export of artistic handmade wooden articles.

What are the conditions for claiming deduction under Section 10BA?

The following conditions must be fulfilled to claim deduction under Section 10BA:

• The articles must be artistic and handmade.
• The articles must be made of wood.
• The articles must be exported.
• The articles must be produced in India.
• The assesses must be the exporter of the articles.

What is the rate of deduction under Section 10BA?

The rate of deduction under Section 10BA is 50% of the profits and gains derived from the export of artistic handmade wooden articles.

What is the meaning of the term “artistic and handmade”?

The term “artistic and handmade” means that the articles must be made by hand and must have an artistic value. The articles must be more than just utilitarian objects. They must have some aesthetic appeal.

What is the meaning of the term “made of wood”?

The term “made of wood

means that the articles must be made primarily of wood. However, other materials, such as metal or glass, may be used in the making of the articles, provided that wood is the primary material.

What is the meaning of the term “exported”?

The term “exported” means that the articles must be physically transported outside India.

What is the meaning of the term “produced in India”?

The term “produced in India” means that the articles must be manufactured or processed in India.

What is the meaning of the term “exporter of the articles”?

The term “exporter of the articles” means that the assesses must be the person who is responsible for the export of the articles. The assessed must be the person who has entered into a contract with the foreign buyer for the sale and export of the articles.

How to claim deduction under Section 10BA?

To claim deduction under Section 10BA, the assessed must submit a certificate from the Export Promotion Council for Handicrafts (EPCH) to the Income-tax Officer. The certificate must certify that the articles exported by the assesses are artistic and handmade wooden articles.