Scrip dividend taxation

[don1]

When one opts for scrip dividend instead of a cash dividend, is the divi tax deducted at source before the scrip is issued? If not, how does such a transaction affect the capital gains tax declared when the shares are sold at some future date (after being held for more than 3 years)? Perhaps one could assume that the shares would be regarded as having a cost price of zero effectively showing a 100% capital gain when they are sold.