Masterton now has one per 806 people compared to the national average of one per 1000 people.
Another off-licence, resulting in one for every 780 persons, would accentuate the difference, it said.
"It is not a quantum leap to conclude that with so many off-licences in the district and with another proposed to be located in a socially-deprived area where alcohol-related harm exists, that increased alcohol-related harm might occur.
"This is the antithesis of what the object of the Act is intended to achieve."
It concluded if it was hearing the original application, it would have reached exactly the same conclusion as the committee and for the same reasons.
Sandhu, through his lawyer Jonathan Wiles, argued any effect of a new store would be less than minor given the number of existing off-licences in the area.
He also argued there was insufficient evidence but the authority disagreed.
"There was just enough evidence for the committee to conclude the Masterton East community is an area where alcohol-related harm prevails."
The authority said Sandhu had failed to counter that evidence to any significant degree.
Regional Public Health's Dr Stephen Palmer, who opposed the original application, had said the town was saturated with outlets and cited research that people in high deprivation areas were vulnerable to harm.