42. Tax deemed deducted

Where a company pays or distributes without deduction of tax a dividend from which it is entitled to deduct tax under this

Part, the dividend shall be deemed to be dividend of such gross amount as determined in accordance with the formula—

1

x

B

(1-A)

where

A is the rate applicable to the company at the time of payment or distribution of dividend;

B is the amount in fact paid or where section 41

applies and the dividend consists of property other than money, the amount of the market value of that property at the time of distribution of the dividend, and a sum equal to the difference between that gross amount and the amount in B in the above formula shall be deemed to have been deducted from the dividend as tax.