## Grants in the Nature of Promoter's Contribution
Some grants are given as a one-time incentive to encourage investment — not tied to specific expenses or specific assets:
- Grant to set up a plant in a backward/underdeveloped region
- Grant to invest in a priority sector or industry
- Any grant where no further conditions remain to be fulfilled
---
### Treatment: Credit to Capital Reserve
```
Bank/CIB A/c Dr [grant amount]
To Capital Reserve [grant amount]
```
Why Capital Reserve?
These grants are analogous to a promoter injecting equity capital. They permanently strengthen the enterprise's capital base. Treating them as income would overstate P&L profitability and mislead users about the enterprise's earning power.
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### When Does This Treatment Apply?
| Situation | Treatment |
|---|---|
| Grant to set up business in backward region | Capital Reserve |
| Grant for past expenses — no future obligations | Capital Reserve |
| Non-depreciable asset grant — unconditional | Capital Reserve |
| DGG transferred after all conditions are met (non-depreciable) | Capital Reserve |
---
### Key Distinction from Other Grant Types
| Feature | Promoter's Contribution Grant | DGG (Revenue Grant) |
|---|---|---|
| Goes to | Capital Reserve (permanent) | Released to P&L over time |
| Future conditions | None remaining | Yes, ongoing |
| P&L impact | Never | Gradually each period |