Question

In the absence of a partnership deed, which of the following statements is correct?

• A. Interest on partners' Capital will be allowed @ 6 % p.a.
• B. Interest on partners' Loan is to be given @ 6 % p.a.
• C. Profits are shared in the ratio of Capital
• D. Interest on Drawing is to be charged @ 6 % p.a.

Hint:

Without a partnership deed, interest on partners' loans is allowed at 6\% p.a., but interest on capital and drawings is not payable unless agreed.

Answer 1

The Correct Option is B

Step 1: Default Rules - Indian Partnership Act (1932)
The Indian Partnership Act dictates partners' rights and duties when no partnership deed exists.
Step 2: Interest on Partner Loans
Section 13 of the Act mandates a default interest rate of 6% per annum on loans provided by partners to the firm, unless otherwise agreed. Consequently, partners are to receive 6% p.a. interest on their loans by default.
Step 3: Interest on Capital
Interest on partners' capital is not applicable unless explicitly agreed upon. This renders (a) incorrect.
Step 4: Profit Sharing
In the absence of an agreement, profits are distributed equally among partners, not based on capital contribution. Therefore, (c) is incorrect.
Step 5: Interest on Drawings
Charging interest on drawings necessitates an agreement; no default rule applies. This makes (d) incorrect.
Step 6: Conclusion
Statement (b) aligns with the default provisions of the Act.