In this paper voltage recovery after voltage dip that cause magnetizing inrush current which is a new phenomenon in power transformers are discussed and a new technique is proposed to distinquish internal fault conditions from no-fault conditions that is also containing these new phenomenons. The proposed differential algorithm is based on Artificial Neural Network (ANN). The training and testing data sets are obtained using SIMPOW-STRI power system simulation program and laboratory transformer. A novel neural network is designed and trained using back-propagation algorithm. It is seen that the proposed network is well trained and able to discriminate no-fault examples from fault examples with high accuracy.