Deep depression around area — tree sinks into it (7)
I believe the answer is:
caldera
'deep depression' is the definition.
(a caldera is a volcanic crater)
'around area tree sinks into it' is the wordplay.
'around' becomes 'c' (abbreviation for 'circa').
'area' becomes 'a' (maths abbreviation).
'tree' becomes 'alder' (alder tree is a kind of tree).
'sinks into it' is an insertion indicator.
'c'+'a'='ca'
'ca' enclosing 'alder' is 'CALDERA'.
(Other definitions for caldera that I've seen before include "Large volcanic crater -- lead car (anag)" , "Big hole in rock" , "Large volcanic crater - race lad (anag)" , "Basin-shaped crater at top of volcano" , "Result of eruption" .)