A, B and C were in partnership till 31.12.2016, when C retired from partnership. The amount due to him after necessary V adjustments arising in connection with such retirement was ₹1,00,000. At the request of the other partners, he agreed to leave the amount with the new firm as loan on the following terms and conditions:

(i) Repayment of loan to be made at the end of each year by annual instalments representing 40% of future annual profits after charging salary of ₹7,500 p.a. to each partner.

(ii) Interest @ 5% p.a. calculated on the balance outstanding at the beginning of the year to be credited, but such interest will not be taken into account for calculation of 40% stated above.

Profits before charging partners’ salaries, were as follows :

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2012 - 15,000; 2013 - 1,03,125; 2014 --