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Indian Partnership Act, 1932

6. Mode of determining existence of partnership

In 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-

  1. by a lender of money to persons engaged or about to engage in any business,
  2. by a servant or agent as remuneration,
  3. by the widow or child of a deceased partner, as annuity, or
  4. by a previous owner or part owner of the business, as consideration for the sale of the good will or share thereof,

does not of itself make the receiver a partner with the persons carrying on the business.

Indian Partnership Act, 1932 Back

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