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I received professional fees from a nationalised bank for work done in April 2008. The bank deducted income tax at source and has issued Form 16A. In the column ‘For the period’, the deductor has mentioned the period as April 1,2007 to March 31, 2008, instead of April 1, 2008 to March 31, 2009. On inquiry, I am informed that since the bank has already made provision for its income-tax liability in the accounts for the financial year 2007-08, the period mentioned in Form 16 A is correct and could not be changed.

My worry is that since I adopt the cash system of accounting, the fees relate to the financial year 2008-09 and hence I would have problems in claiming TDS credit in the assessment year 2009-10 on the basis of the Form 16A issued by the bank. Further, I would have problems with advance tax and the service tax authorities. Should I claim credit for the TDS during the financial year 2007-08 or for the financial year 2008-09? Please advice.

A. Kumar, Thiruvananthapuram

Since you are following the cash system of accounting, you would be justified in showing this income as the income of the previous year 2008-09 irrespective of the system of accounting adopted by the payer of income. In this case of course the divergence is a result of a plain mistake on the part of the payer.

Nevertheless, there is no reason why you should fall in line with the accounting system followed by the payer of income.

What is the meaning of the term ‘open outcry system’ in the context of dealings in stock exchanges?

Prabha Nair, Kozhikode

The system is almost passé except perhaps in Japan. Before screen-based trading replaced it, open outcry system was the norm in all the stock exchanges where brokers or their authorised representatives would make their offers, counteroffers and acceptances using their vocal chords loudly and proudly.

Coarse as the system was, it somehow worked except for a few aberrations what with the brokers being brought around the table at the end of the day by the stock exchange so as to formalise on paper what was concluded during the trading session informally.

What is a two-way quote in the context of dealings in foreign exchange markets?

Prabha Nair, Kozhikode

In any market, be it for currencies or shares, market makers offer two-way quotes — the price at which they are prepared to buy and the price at which they are prepared to sell.

For example, if a dealer in foreign currency quotes Rs 42.50/42.70 for a dollar what he is effectively saying is if you buy a dollar from him, you will have to pay him Rs 42.70 and if you want to sell a dollar to him, he will pay you only Rs 42.50. In other words, his margin or spread is 20 paise.

In technical language the two-way quote is called bid-ask rate.

This is a transparent way of doing business as the one making enquiry is told in transparent terms what the dealer expects by way of margin and, more importantly, announces his intention loud and clear — he is seriously into the business of buying and selling currencies and would not change his quotation chameleon-like once he comes to know you are a buyer and not a seller and vice-versa.

By giving out the two-way quotation without asking whether you are a buyer or a seller, he is proving his bona fides. It is for the enquirer to take or leave the quotation.

S. MURLIDHARAN

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