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Contract of Partnership 1. Nature and Definition of Partnership Definition Section 4 of the Indian Partnership Act, 1932 defines partnership as: “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.” Thus, partnership is based on contract , profit-sharing , and mutual agency . Essential Elements of Partnership To determine whether a partnership exists, the following conditions must be satisfied: Agreement between Persons Partnership arises from a contract, not from status (like joint family). Example: In a Hindu Undivided Family (HUF), members may do business together but it is not partnership because there is no contract. Case law: Chandrakant Manilal Shah v. CIT (1992) – Partnership must be based on agreement; HUF business is not partnership. Existence of Business There must be a business (trade, occupation, or profession). Mere co-ownership of property is not par...