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Padam and Virender were partners in a firm with no partnership deed. Their drawings during the year ended 31st March, 2015 amounted to Rs. 5,00,000 and Rs.  2,00,000 respectively. Virender was of the opinion that the firm should drawings @ 6% p.a. However, Padam disagreed to it. Padam convinced Virender that interest cannot be charged on drawings. What argument must have been put forward by Padam that convinced Virender?

SOLUTION

Padam would have given the argument that if Partnership Deed does not exist, Partnership Act, 1932 prevails, as per which no interest is charged on drawings.

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