The correct answer is: A. No interest will be allowed
In the absence of an express agreement between partners to the contrary, or a provision in the partnership deed, interest will not be allowed on loans made by partners to the partnership. This is because, in the absence of such an agreement, the loan is considered to be a capital contribution by the partner, and not a loan. Capital contributions are not subject to interest.
However, it is important to note that this is just a general rule. There may be specific circumstances in which interest may be allowed on a loan made by a partner to the partnership, even in the absence of an express agreement or provision in the partnership deed. For example, if the loan is made on commercial terms, or if the partner has a material interest in the success of the partnership, then interest may be allowed.
If you are unsure whether interest is payable on a loan made by a partner to the partnership, you should seek legal advice.