Short term capital gain of equity shares

It is obvious and fairly reasonable  to presume that income is always as reduced by incidental expenditure which can be attributed to earning of income. Amount borrowed specifically to invest in shares will be deemed to have been  attributed to STCG LTCG proportionately. 

@ X. As per your query, your income is from Capital gain which clearly falls under Sec 111A. You can claim only those deductions as specified in 111A. Since interest on loan is not specified there, you CANNOT claim it. You could have claimed it, if you were doing intraday and you have clarified that its not intraday. So you cant claim.

@ Kapadia - Any deduction under tax law should strictly be as per the wordings of tax law. If your transactions cannot be brought within the ambit of any specific section, you cannot claim it as deduction. There are certain incomes which are taxed at a flat rate irrespective of expenditure incurred to earn the income. "Matching concept" of accounting cannot be straight away applied to tax computation. Your reason is perfect only If income from sale of shares is being treated as Business income; then definitely you can claim interest on loan as deduction. His transaction falls under CG. Therefore no deduction. 

@ Rashmi - Even intraday trading is not considered as speculative. You can treat it as a separate business of the assessee and file the returns showing it as normal business income..I have a read a HC judgment to this effect. I dont remember the case name. Substance of the judgement being - "Frequent buying and selling of shares is business income. Whether BI or CG should be determined on the basis of proportion of sharetrading turnover to the total turnover of the assessee, frequency, volume and magnitude of transactions" If i get the judgement I will post citation. 

Completely agree with Mr. Ashok J