( 1 ) THESE are two applications under Section 256 (2) of the Income-tax Act, 1961 (hereinafter referred to as "the Act") arising out of a common order passed by the Income-tax Appellate tribunal. These applications have been made at the instance of the Revenue and pertain to the assessment years 1987-88 and 1988-89. In these applications, the following common question has been proposed : "whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was justified in directing to allow depreciation when the Income-tax Officer had given a clear finding in his assessment order that the income was estimated after allowing admissible depreciation ?"

( 2 ) THE assessee is a contractor. The Income-tax Officer rejecting the book profits computed the income by applying a flat rate. In the assessment year 1987-88, he worked out the taxable income by applying a net rate of ten per cent. and observed : "the assessee has claimed depreciation. The depreciation claimed by the assessee is not allowable when net rate is applied when working the income. "

( 3 ) IN the other year 1988-89 also a net rate of ten per cent. was applied but there are no obse