Seth SS and the Seth JS were partners, in a business for many years. JS's share in the business was three-fifths as large as that of SS. As both were aging. They agreed to take in as a partner SS's son-in-law, Chottu. Chottu agreed to pay them Rs. 8,00,000 with the condition that after he became a partner, everybody should own exactly one-third of the business. "I suppose the bulk of this amount will go to my father-in-law” said Chottu. "Why will it not be the whole amount?" exclaimed SS. "What do you mean?" retorted JS, "it has to be divided in the proportion of our share of profit." How should this amount of Rs. 8,00,000 be shared?
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As Chottu paid Rs. 8,00,000 to own one-third of the business, the whole business is worth Rs. 24,00,000 out of which Rs. 15,00,000 is SS’s share and the balance of Rs. 9,00,000 that of JS. After Chottu joins in, each is to own exactly one third of the business and so the old partners should with draw their investments over and above Rs. 8,00,000. Thus SS gets Rs. 7,00,000 and Rs. 1,00,000 only is JS's rightful share.
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