Sheraz Arshad said the complaint was not about money
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A council which refused to sell land for a new mosque has been criticised for its handling of the case.
Ribble Valley Borough Council provoked anger when it refused the application in Clitheroe, Lancashire, in 2004.
Local Government Ombudsman Anne Seex investigated a claim that the decision was taken in response to racially motivated opposition in the area.
Although she found faults in the authority's decision-making process, she said it was entitled to make it.
An application was made to buy some council-owned land for a mosque in September 2004, but was met with opposition.
The decision was deferred until the policy and finance committee had received a report on the impact of the proposal on the "social well-being" of local residents.
But the council decided to use the site at Kirkmoor for a mix of elderly people's and sheltered accommodation and affordable housing for families - even though the district valuer said the authority would make more money through the mosque plan.
Mrs Seex criticised the council for not following accepted good practice and reaching a decision that was not supported by the information the committee was supplied with.
She ordered the authority to pay the unnamed complainant £250 for his trouble in pursuing the complaint.
Bold leaders
Sheraz Arshad, of the Medina Islamic Education Centre, said: "It's not about the money, it's about the principle of it.
"All we are talking about here is a planning application for a place of worship and it should be looked at as nothing else.
"I think we've got to be brave and we've got to be bold as community leaders, and as council leaders they have to do the same."
The council is now helping the applicant in trying to find a new site for the mosque.
Its chief executive David Morris said the authority was carefully considering the Ombudsman's findings.
"The Ombudsman has found that we did not act unreasonably in our decision not to sell the land for a mosque, but has found maladministration in relation to our asset management.
"Naturally we are disappointed and a full report on this issue will be made to councillors in due course."