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    Question

    According to Indian Partnership Act, 1932 which of the

    following situations makes a person a partner in a firm?
    A Sharing of profits or gross returns arising from property Correct Answer Incorrect Answer
    B Receipt of a share of the profits of a business Correct Answer Incorrect Answer
    C Receipt of a payment contingent upon the earning of profits Correct Answer Incorrect Answer
    D Lending money to persons engaged in any business Correct Answer Incorrect Answer
    E Partnership by contract and not by status Correct Answer Incorrect Answer

    Solution

    Section 6 of Indian Partnership Act, 1932 n determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. Explanation 1.—The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property does not of itself make such persons partners. Explanation 2.—The receipt by a person of a share of the profits of a business, or of a payment contingent upon the earning of profits or varying with the profits earned by a business, does not of itself make him a partner with the persons carrying on the business; and, in particular, the receipt of such share or payment— (a) by a lender of money to persons engaged or about to engage in any business, (b) by a servant or agent as remuneration, (c) by the widow or child of a deceased partner, as annuity, or (d) by a previous owner or part owner of the business, as consideration for the sale of the goodwill or share thereof, does not of itself make the receiver a partner with the persons carrying on the business.

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