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 under Indian Partnership Act (1932) 
In the absence of a partnership deed, the Indian Partnership Act governs the rights and duties of partners. 
Step 2: Interest on partners' loan 
According to Section 13 of the Act, partners are entitled to interest on loans given to the firm at 6\% per annum if there is no agreement to the contrary. Thus, partners must be paid interest on their loans @ 6 % p.a. by default. 
Step 3: Interest on capital 
Interest on partners' capital is not payable unless agreed upon. So (a) is incorrect. 
Step 4: Profit sharing 
Profits are shared equally among partners in absence of an agreement, not in ratio of capital. So (c) is incorrect. 
Step 5: Interest on drawings 
Charging interest on drawings requires an agreement. No default rule exists. Hence, (d) is incorrect. 
Step 6: Conclusion 
Therefore, statement (b) is correct under the default provisions.