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Is Sharing Of Profit Conclusive Proof Of Partnership?

Under section 4 of partnership act 1932, it is defined that partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually partners and collectively a firm, and the name under which their business is carried on is called the firm name. To determine whether a partnership exists between a group of persons, we have to look at the real relation between them as shown by all relevant facts taken together. It further says that sharing of profits or of gross returns arising from a property owned jointly by them does not by itself makes them partners.

Illustrations –

1. A and B buy 100 bales of cotton to sell later on profit which they agree to share equally. A and B are partners in respect of such cotton.

2. A and B buy 100 bales of cotton together for personal use. There is no partnership between A and B.

3. A, a goldsmith, agrees with B to buy and provide gold to B to work on an ornament and to sell and that they shall share the profit. A and B are partners.

4. A and B are carpenters working together. They agree that A will keep all the profits and will pay B a wage. They are not partners.

5. A and B jointly own a ship. This circumstance does not make them partners.

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