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CA Foundation · Business Laws · The Indian Partnership Act, 1932

Asha and Bina jointly own a shop building inherited from their father. They let it out to tenants and share the rent of Rs 1,20,000 a year equally. Which statement is correct under the Indian Partnership Act, 1932?

Asha and Bina are not partners merely because they co-own the building and share its rent. A partnership requires an agreement to carry on a business for profit, and joint ownership with shared income from property does not by itself create one.

  1. AThey are partners because they share profits equally
  2. BThey are partners because they jointly own property
  3. CThey are not partners merely because they share rent from jointly owned propertyCorrect
  4. DThey become partners only if the rent exceeds Rs 1,00,000

Explanation

Joint ownership of property and sharing of income from it does not by itself create a partnership. A partnership needs an agreement to carry on a business and share its profits, which is absent here. The option on equal sharing is wrong because sharing profits alone is not conclusive without a business.

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