Question

Assertion (A): In the absence of Partnership Deed or Agreement, interest on amount due to Deceased Partner is paid @ 6% p.a. on the outstanding amount.

Reason (R): Unpaid amount is not a loan to the firm. Thus, interest is not payable in the absence of an agreement.

In the context of the above two statements, which option is correct?

विकल्प

• Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).

• Assertion (A) and Reason (R) are correct, but Reason (R) is not the correct explanation of Assertion (A).

• Assertion (A) is correct, but Reason (R) is not correct.

• Assertion (A) is not correct, but Reason (R) is correct.

Answer 1

Assertion (A) is correct, but Reason (R) is not correct.

Explanation:

Assertion (A) is correct. Under Section 37 of the Indian Partnership Act, the amount due to a retiring or deceased partner (if not paid) attracts interest at 6% p.a. until paid (the legal representatives may alternatively claim the share of profits earned by use of that amount). Reason (R) is incorrect; the unpaid amount is treated as an amount due/loan, and interest is payable by operation of the Act even in the absence of a deed or agreement.