1. The only question arising in the connected appeals filed by the Revenue against the order of the Income Tax Appellate Tribunal is whether the 'finance charges' collected by respondent - companies under hire purchase agreements attract tax under the Interest Tax Act , 1974 as amended by Finance (No. 2) Act of 1991. According to the Revenue, 'finance charges' collected by the respondents for vehicle financing is nothing but 'interest' at flat rate loaded along with loan amount and collected in instalments and therefore, the same is assessable under the Act. The case of the respondents on the other hand is that hire purchase transactions are outside the scope of the and so much so, finance charges collected cannot be assessed as interest. We have heard Senior Counsel Sri. P. K. R. Menon appearing for the appellant and Senior Counsel Sri. P. Balachandran and other counsel appearing for the respondents.

2. Admittedly respondents being hire purchase finance companies are specifically covered by the definition 'credit institution' which are liable to pay interest tax on interest covered by