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I saw the following dialogue:

A: Do you think John can come over and help us?
B: I called him. He says he can't. He says he is busy this evening.

Is it correct to use present tense in B's reply? How about past tense? Any difference?

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Maybe better-suited to ell.stackexchange.com ? – virmaior Jan 3 '14 at 4:50
Why the down votes? Why not answer the Q instead? – Kris Jan 3 '14 at 7:19
There's a very recent related post on ELU -- please go through the previous questions. Good luck. – Kris Jan 3 '14 at 7:20

The twice repeated he says is present tense because, although the conversation took place in the past, it represents a present truth. He is is present tense because the present tense is one of several ways English has of expressing the future.

He said he couldn’t. He said he was busy this evening would also be possible, but the use of the past tense conveys a sense of finality about the matter in a way that the present doesn’t.

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In my opinion, the reasons given by David and Barrie are incorrect, and the real reason is that the present tense can be used to put the hearer right in the scene. Some people call it the "historical present" because it is often found in narrative accounts, but in general it can be used in many more ways, even in hypothetical situations. By using "he said", it simply states the conversation as having happened. But by using "he says", it brings the hearer 'back to the time of the event itself', and the hearer perceives the conversation as if he is there. Neither the simple past tense nor the simple present tense implies that John still cannot come at the time A talks to B. It could well be that John might have just finished and show up at the door just after that! Neither does the present tense in this example connote a generic statement of John always saying that, because of the context.

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Another way of looking at it is continuation and persistence. John always says he doesn't want to come, but then he does. John says he hates Mondays, because he says it a lot. But in the case presented here, past tense is more accurate; John said something, and there's no suggestion it's an ongoing condition or perpetual point of view.

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It's correct to use present tense. Because his busy status still takes effect at present situation. You can understand this way, when ever you call him, he always replies you that he is busy and he can't come.

When you use past tense. It means when the time A called him, he was busy and he thought he couldn't come. but when you call him at present, he might not be busy, and he might come.

however I am confused that should be use says or said..

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Not really confusing. He said is more accurate if you called him. He says is colloquial representing that this is his current statement. – virmaior Jan 3 '14 at 4:51

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