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-
- by a lender of money to persons engaged or about to engage in any business,
- by a servant or agent as remuneration,
- by the widow or child of a deceased partner, as annuity, or
- 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.