Booking of capital subsidy

[Velayutham Panchatcharam]

Dear Members,

We have received capital subsidy from government towards fulfilment of investment as per MOU. My question is whether this subsidy is booking under other income or capital reserve?

Looking for your reply at the earliest.

Best regards

Panchatcharam V

[CSSANJAY MALHOTRA]

Same is to be accounted as CAPITAL RECEIPT and to be shown in Capital Reserve. Had the same been of Revenue Nature such as Sales Tax Subsidy ..........it would have been accounted as Revenue receipt.

[DR.MARIAPPAN GOVINDARAJAN]

I agree with the views of CS Sanjay Malhotra.

AI Summary

Capital subsidy treatment: investment linked government grants are capital receipts credited to capital reserve, not other income. Government grants provided to support or induce fixed asset investment under an MOU constitute capital receipts and should be credited to a capital reserve; by contrast, subsidies of a revenue nature that compensate operating activities are treated as revenue receipts and recognized in profit or loss.