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Jagmohan and Ramesh were partners with capital contribution of Rs.10,00,000 and Rs.5,00,000 respectively. They do not have a Partnership Deed. Jagmohan wants that the firm should allow interest on capital @ 6% p.a. Ramesh convinced Jagmohan that interest cannot be allowed on capital to which Jagmohan agreed after discussion. What argument must have been put forward by Ramesh that convinced Jagmohan?

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In the absence of a partnership deed, the provisions of the Indian Partnership Act, 1932, apply. According to the Act, if there is no agreement regarding the interest on capital contributed by the partners, then no interest on capital is allowed to any of the partners. Therefore, in this situation, Jagmohan’s view of allowing interest on capital at 6% p.a. is not acceptable, and Ramesh must have convinced him stating the provisions contained in the Partnership Act, 1932.

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