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Saturday, April 13

Real relation between parties, determining factor for existence of partnership


Real relation between the parties, as shown by all relevant facts taken together to determine whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, as per section 6 of Indian Partnership Act, 1932

Thus as per Explanations of section 6, following shall not make one partner or create partnership:
(I) The sharing of profits or of gross returns arising from property by persons holding a joint or common interest in that property.
(II) Mere receipt by a person of a share:
(a) of the profits of a business, or
(b) of a payment contingent upon the earning of profits, or varying with the profits earned by a business,
does not itself make him a partner with the persons carrying on the business

(III) Further mere 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.

See section 6 of the Indian Partnership Act, 1932 on lawzonline.com