West Somerset Council agreed to merge with neighbouring Taunton Deane Borough Council in September to save money.
However, a group of 15 Taunton Deane councillors opposed the merger and launched a legal challenge against the move.
But a High Court judge has ruled the challenge as "premature and academic".
In his ruling Mr Justice Lewis said the Secretary of State "wishes consultation" to take place before he makes the final decision on the new council proposal under legislation.
Taunton Deane Borough Council leader John Williams said: "This judgement is a vindication our approach so far.
"It's also a testament to all the hard work and commitment of our officer team who have ensured we have acted properly and correctly at all times."

The Dow Jones closed at 18,116.04, down 105 points, or 0.6%, while the broader S&P 500 dropped 13 points, or 0.6%, to 2091.5.
The tech-heavy Nasdaq fell 16 points, or 0.3%, to 4,994.73.
The dollar rose against the euro by 0.2% to â‚¬0.9154.
The dollar's rise can hurt large US companies' profits, as they get less from their overseas earnings after currency conversions.
Additionally, the dollar's strength makes it harder for companies to compete with foreign rivals, which may be able to offer similar products more cheaply.
There was some welcome economic data on Tuesday, which showed US consumer prices had rebounded in February, but this failed to lift Wall Street.
The Consumer Price Index rose by 0.2% last month, after fuel prices increased for the first time since June.
The monthly rise follows three consecutive months of declines, including a 0.7% drop in January. On an annual basis, prices in February were unchanged from a year earlier.
Analysts said investors were wary of shares because of the possible impact of the stronger dollar on companies' profits.
"Right now, we are a bit of in a waiting pattern and the big news is going to be when these earnings reports start to hit in April," Peter Jankovskis, co-chief investment officer at OakBrook Investments, told Reuters.

She died in Milan after a long illness, Italy's Ansa news agency reports.
Jonathan Newhouse, chairman of publishers Conde Naste International, described her as "one of the greatest editors who ever made a magazine".
Celebrities including Madonna, Kanye West and Victoria Beckham paid tribute to her.
In a post on Instagram, Madonna posted a photo of her with the caption: "RIP Franca Sozzani! A trail blazer and a True Rebel! You are loved and adored by so many! We will miss you."
US fashion model Kendall Jenner tweeted: "Rest peacefully, Franca Sozzani."
Sozzani took charge of Vogue Italia in 1988 and became a key figure on the global fashion scene.
In 2008, she produced an "all black" issue, featuring black models only. It became an international hit.
Once asked how to define style, she said: "I think people should buy more mirrors than clothes, to see themselves before going out... but I think that clothes need to correspond to one's own personality. That is style."
Sozzani was also a champion of humanitarian causes. She served as goodwill ambassador to fashion for the UN, supporting workers in the fashion world in Africa and Asia and helping to raise money to fight hunger.
In a tribute on the Vogue website, US Vogue editor Anna Wintour described Sozzani as "warm, clever, funny".
"She made everything she worked on appear effortless, regardless of whether it was an event for several hundred; a whirlwind trip to Africa to support the continent's emerging designers; or the creation of yet another newsworthy, provocative, and utterly spellbinding issue of Italian Vogue," she said.
Sozzani attended the Fashion Awards in London earlier this month where designer Tom Ford presented her with the Swarovski award for positive change.

Why? Because of compound interest.
When you save money, it earns interest.
The lump sum grows from interest being added every year or every month.
Interest added on top of that interest is known as "compound interest" - and means that the longer you save, the better off you are.
So people who leave it late - like Dave in the example above - have compounded their financial problems when it comes to cashing in their savings.
But it is worth remembering that pensions usually depend on the success of investments which, unlike savings, do not guarantee a set level of interest.
A judicial review of the decision to merge two Conservative-run local authorities in Somerset has been rejected in full.
[NEXT_CONCEPT]
(Close): The main US share indexes all fell on Tuesday as investors continued to fret about the effect of the strong dollar on corporate results.
[NEXT_CONCEPT]
Franca Sozzani, editor-in-chief of Vogue Italia for 28 years and a champion of Italian fashion, has died at the age of 66.
[NEXT_CONCEPT]
Saving a small amount of money regularly from when you start work will leave you better off than saving a bigger amount in later life.