Long and short term capital gain

Where the result of the computation made for any assessment year under sections 48 to 55 in respect of any short-term capital asset is a loss, the assessee shall be entitled to have the amount of such loss set off against the income, if any, as arrived at under a similar computation made for the assessment year in respect of any other capital asset.

Language is very clear. Short term loss on one kind of capital asset  can be set off with capital gains of any other capital asset. It means that there is no distinction between types of capital asset. So short term capital loss on share can be adjusted with short term or long term gains on any other income.

Carry forward of STCL

Carry forward of loss under capital gains is delat in section 74 of the I T Act.

74. [(1) Where in respect of any assessment year, the net result of the computation under the head Capital gains is a loss to the assessee, the whole loss shall, subject to the other provisions of this Chapter, be carried forward to the following assessment year, and

(a) in so far as such loss relates to a short-term capital asset, it shall be set off against income, if any, under the head Capital gains assessable for that assessment year in respect of any other capital asset;

(b) ...............

(c) if the loss cannot be wholly so set off, the amount of loss not so set off shall be carried forward to the following assessment year and so on.]

(2) No loss shall be carried forward under this section for more than eight assessment years immediately succeeding the assessment year for which the loss was first computed.

So, the carry forward of short term capital loss shall be up to 8 years and it can be adjusted with any kind of capital gains.

It means....:-

If the shares are held for a period less than 12 months, and if you have incurred loss, it is short term capital loss and can be set off against, income from any other short term or long term capital asset(including shares held for more than 12 months) in the same year. If it is to be carried over to the next year, it can be set off against income from short term or long term capital asset in that year. The unabsorbed loss can be carried over for eight years. No document need be submitted with the Return of Income, but the records, such as vouchers evidencing the transactions including accounts if any maintained should be kept and produced before the Income tax officer, when called for.

no you can not claim it as short term loss by selling such shares to your friend .. it has to be treated as long term loss because your holding period exceeds 1 year..

Well, I'm not going to discuss IT provisions now, Hope you have the Idea. Here are the practical problems that may arise

you have not mentioned which form of shares you are holding, I mean Listed or unlisted

If unlisted shares, you can (unofficial) back date the trasfer date and make it Short term Loss

But story will not be that simple in case of listed shares, its not possible to Transfer in back date, 

Of course you can trasfer the shares to your friend through off market trade but that has to be routed through your depository only

There are lot of rules for that, and you are also subject to charges like STT, so in this scenario its not possible to make your loss as STCL