Expense allowability.

No. Under Capital gains, such expenditures are not claimable.

 

Interest on gain can't be allowed but u can claim interest expense while calculating income of dividend only upto 20%

But can interest on loan be allowed as expense if Income is shown under the head business income instead of capital gain?

Yes, if its your routine business.

Any chances of defective return notice if assessee
1) Shows Business income along with salary income in ROI
2) If already filed as capital gain in original return and now showing as business income in revised return
3)As per AIS TIS statement it is shown as Capital gains.

Kindly guide
Thanks in advance.

1. If the transactions are very frequent, mostly on daily basis, then you can treat it as business income; otherwise difficult to be accepted. 

2. When already declared under CG, better not to change it for creating any suspicion, specifically, when income gets reduced.