Assertion (A): A, B and C were partners in a firm. Partner B gave a loan of ₹ 10,00,000 to the firm without an agreement as to the rate of interest. At the year end, all partners agreed to allow interest on the loan by B @ 9% p.a. Reason (R): In the absence of Partnership Deed provisions of the Partnership Act, 1932 apply. Thus, interest on a loan by B should be allowed @ 6% p.a. and not @ 9% p.a. In the context of the above two statements, which of the following is correct?

Question

KollegeApply · Accepted Answer

Only (A) is correct. Explanation: Assertion (A) is correct because partner B gave a loan to the firm, and all partners mutually agreed at the end of the year to allow interest on the loan at 9% p.a., which is valid. However, reason is incorrect in this context. While it is true that in the absence of a partnership deed, the Partnership Act, 1932, applies and allows interest at 6% p.a., this rule only applies when there is no agreement. In this case, since all partners agreed to pay 9%, that agreement overrides the default provision. Therefore, only assertion is correct.

AChoose Your Answer