Local guest house proprietor, Louise Oldfield, had asked one of the country's top judges to quash the grant of planning permission by communities secretary Eric Pickles for redevelopment of town landmark Arlington House and surrounding properties in Arlington Square.
The approval included plans for a 7,500 square metre, 24-hour Tesco store.
During the hearing Oldfield had branded the secretary of state's earlier "screening direction" in which he took the view that no Environmental Impact Assessment (EIA) was required for the Arlington project as "salami slicing."
It was reaching the decision without all aspects of the project being taken into account, she claimed.
In court the 19-storey Arlington House was described as a highly prominent gateway to the town, adjoining both the seafront and town centre conservation areas and the Dreamland amusement park site.
Oldfield argued that the planning officer who made the screening direction split the Arlington project in two, and only considered certain elements of the proposal - the refurbishment of Arlington House, outline permission for a 60-bed hotel and development of a new superstore.
She accused him of failing to assess the impacts on the town of other aspects of the scheme - including demolition of retail shopping in Arlington Square, demolition of a two-storey car park, final approval for the hotel, a total loss of 500 car park spaces for tourists and increases in traffic on surrounding highways - as well as the total impact caused by this and other plans, including the plans for the redevelopment of the Dreamland amusement park.
Leading QC, Ian Dove who represented her at the hearing, argued that there had been significant sewage floods in the area in 2012 and 2013, and told the judge: "It is precisely these kinds of effects that should be considered in an EIA screening process as the cumulation with other projects. This is particularly so when it is evident that the area's sewage system is under strain."
However, in his ruling yesterday, just nine days after the hearing, Lord Justice Moses said: "There is no basis whatever to suggest that the Arlington project was no properly looked at as a whole for the purpose of considering its environmental impact and the likely significant effects of the impact.
"All that fell within the scope of the development was properly considered. No aspect was improperly sliced off."
He said that it was clear that the loss of car parking spaces for tourists was properly considered, the hotel had been referred to specifically as part of the development and that there had been correspondence with Southern Water about the implications for the sewerage drainage system, and it was "satisfied".
Turning to the question of the cumulative impact of Arlington and neighbouring Dreamland, he said that each project would "plainly contribute to the regeneration of Margate" and that, in the light of the "close relationship" of the two projects their impacts did have to be considered cumulatively.
He said: "The development of Dreamland could not be ignored or put to one side when considering the environmental effects of Arlington and their significance in order to fulfil the requirements of the EIA Regulations."
However, he continued: "But were they put to one side? Is the appellant correct when she contends that Dreamland was not taken into account?
"In the screening decision of 18 July 2012 it is demonstrated that the Dreamland project was considered. It is impossible to say that the inspector failed, when considering the screening direction, to take into account the Dreamland project. It was taken into account but, when considered cumulatively, it did not lead to the view that significant environmental effects were likely.
"It is not possible in my view to suggest that the Dreamland project or its effects were ignored."
He said that it was important to distinguish between the freestanding impacts of the Dreamland project and the cumulative effects of the two developments together, and that, once a decision was reached that there were no likely significant cumulative impacts, the inspector and the secretary of state were not required to consider the freestanding impacts of Dreamland just because the two projects are linked.
A submission by Portas to the public inquiry into the plans stated that the proposal "would seriously undermine the town centre regeneration efforts" because it would "reduce vital car parking space for the town centre and divert consumers away from local independent high street shops".
She said: "This is a disturbing threat to the regeneration of Margate and is counter to all the work being undertaken in the town."
But the judge said: "It is easy to understand the dismay of people living in Margate at the fact that what is proposed is a Tesco superstore, whereas Margate was chosen as a Portas Pilot town and the importance of different and smaller retail development was emphasised in the evidence of Mary Portas.
"But this is not a matter for the court. This was a matter for planning judgment. No doubt the developer and Tesco will make sure that any building and architectural design is sensitive to the needs of regeneration of that area, near as it is to the seafront."
"The irony behind the challenge, which I dismiss, is that everyone believes in the regeneration of Margate and wishes it well. This type of unsuccessful challenge was not in fact focused on the real grounds of objection and should not have been deployed to inhibit the successful regeneration of Margate."