a)Assessee, a public sector enterprise, was required to sell electricity to State Electricity Board at tariff rates notified by CERC. The Government has introduced a mechanism to generate additional cash flow by allowing power generating companies to collect AAD by way of tariff charge.
b)It was decided that the year in which normal depreciation would fall short of original scheduled loan repayment such shortfall would be collected as advance against future depreciation. Thus, the issue that arose for consideration of the Tribunal was as under: Whether the CIT(A) was right in deleting the addition made by the Assessing Officer on account of 'AAD', in spite of the Hon'ble Supreme Court's ruling ( in case of National Hydroelectric Power Corpn. Ltd v. CIT  187 TAXMAN 193) wherein, it was held that the advance against depreciation was “income received in advance”?
The Tribunal held in favour of assessee as under:
1)The Supreme Court in case of National Hydroelectric Power Corpn. Ltd ( Supra) held as under: AAD was not meant for an uncertain purpose. It was an amount that was under obligation, right from the inception, to get adjusted in the future, hence, it could not be designated as a reserve.
AAD was nothing but an adjustment by reducing the normal depreciation includible in the future years in such a manner that at the end of useful life of the Plant the same would be reduced to nil.
Therefore, the assessee could not use the AAD for any other purpose except to adjust the same against future depreciation so as to reduce the tariff in the future years.
2)Thus, after considering the categorical finding of the Supreme Court it was to be held that the CIT(A) was correct in holding that AAD could not be added in the computation of the normal income. - UNION OF INDIA V. INTERCONTINENTAL CONSULTANTS & TECHNOCRATS (P.) LTD  49 taxmann.com 520 (SC)