That place in which to see a bit of tragedy (7)
I believe the answer is:
Here is my best explanation:
'that place in which to see a bit of tragedy' is the definition.
'theatre' can be an answer for 'that place' (I have seen 'Place of entertainment ' mean 'theatre' so perhaps 'place' could also mean 'theatre'). I'm unsure of the rest of the definition.
'that place in which to see a bit of tragedy' is the wordplay.
'that place' becomes 'there' (I've seen this before**).
'in which to see' is an insertion indicator.
'bit of' says to take the initial letters.
The initial letter of 'tragedy' is 't'.
'there' placed around 'at' is 'THEATRE'.
(Other definitions for theatre that I've seen before include "Part of hospital", "Space for dramatic art and surgery", "Space for dramatid art", "where you may get knifed", "Hospital operating room - playhouse", "Plays", "Criterion, possibly", "Where audiences may be present", "Art of writing and producing plays" and "No place".)