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

Mohan, Sohan and Rohan jointly own a house in Jaipur and let it out. They share the rent of Rs 36,000 per month equally among themselves. Under the Indian Partnership Act, 1932, which statement is correct?

They are not necessarily partners. Under the Indian Partnership Act, 1932, joint ownership of property and sharing of gross returns, such as rent, do not by themselves create a partnership, because there is no agreement to carry on a business for profit.

  1. AThey are partners because they share the rent income
  2. BThey are not necessarily partners, because joint ownership and sharing of gross returns do not by themselves create a partnershipCorrect
  3. CThey are partners because they are co-owners of property
  4. DThey are partners only if the rent exceeds Rs 30,000 per month

Explanation

The Act provides that joint ownership of property, and sharing of gross returns from it, does not of itself create a partnership. A partnership needs an agreement to carry on a business and share its profits. Merely sharing rent does not show a business, so option A is wrong, as is C.

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