Cotswold District Council granted outline consent for the store on land at Fosseway Farm, Stow Road, Moreton-in-Marsh in December 2013.
The council recognised the development was contrary to a local planning policy discouraging retail developments outside existing settlement boundaries, but found there were material considerations that justified consent.
Retail expenditure was leaking from the town to other stores and commercial centres further afield and the store was viewed as a means of clawing back some of that trade.
The council also decided that the development would offer local employment opportunities and be accessible and well connected to the town centre, and that reduced vehicle movements would lower carbon emissions.
The permission was challenged by Warners Retail (Moreton) Ltd, owner of a smaller food store operated by Budgens about 120 metres to the north of the town centre.
That store was projected to lose about one-third of its trade if the development went ahead.
It was argued that the council had misapplied the sequential test, the planning principle whereby the preference given to rival retail proposals depends on their relative proximity to existing commercial centres. Those submissions were, however, rejected by the High Court.
In dismissing Warner Retail's appeal against that decision, the Court of Appeal found that the council had justifiably taken the view that there was a pressing need for the new store that would bring real economic benefits to the town.
Despite its sizeable impact on turnover at the Budgens store, there was no preferable site available in or around the town centre, the court ruled.
Warners Retail (Moreton) Limited v Cotswold District Council & Ors. Case Number: C1/2014/2608