The ruling came as Granada, the ITV broadcaster for north-west England, picked up 5 per cent of LWT for pounds 22.7m, boosting its total stake in London's weekend Channel 3 licence holder to 19.9 per cent.
The move has fuelled speculation that Granada is positioning itself for a relaxation of the Broadcasting Act, which prevents Britain's nine largest ITV companies from taking control of counterparts.
There is a widespread belief in the broadcasting industry that the current rules limit one large ITV company to a maximum 20 per cent stake in another. But the ITC yesterday firmly quashed the suggestion.
James Conway, a senior ITC spokesman, said: 'They (Granada) are allowed to go above 20 per cent and up to a point where they do not have a controlling interest. In principle it would be all right for them to increase their stake in LWT as long as it was not majority control.'
The ruling appears to pave the way for Granada to lift its LWT stake further if it wishes, and will doubtless spark speculation that the two sides are planning for an eventual merger.
The purchase, at pounds 5 a share, comes less than a week after Granada snapped up a 15 per cent stake in LWT from institutional investors for about pounds 68m.
Sir Christopher Bland, LWT's chairman, and Gerry Robinson, Granada's chief executive, are due to meet in London today. This is the first time the two have seen each other since Granada's moves but both sides denied that a merger would be considered at the meeting.
Sir Christopher, whose personal stake in the company is worth more than pounds 9m, said: 'We are perfectly relaxed about the Granada stake but there is no agenda for our meeting. A merger is not permitted under existing rules.'
Asked whether he would object to a further purchase by Granada, he said: 'The received view is that if Granada were to take more than 20 per cent, it would begin to look like creeping control. Plainly there is a point at which it does become a controlling interest. I do not think it is a magic level . . . it all depends on the intention of the buyer as well as the absolute figure. But it is up to the ITC to interpret the rules.'
Granada yesterday refused to say whether it planned to raise its stake further. 'We want to be in the best possible position should the rules change,' a spokesman said. 'There is very little downside to our current investment. LWT will always be a significant part of the ITV network and is a good company.'
It is understood that today's discussions are likely to focus on several issues, including the appointment of a Granada director to LWT's board. In addition, they will also discuss a sharing of transmission facilities and international joint ventures.
Granada's purchase is the latest of several multi-million-pound deals in Britain's commercial television industry over the past two years. Last month LWT paid pounds 14m for a 14 per cent interest in Yorkshire-Tyne Tees, which was itself created by the merger of two north-of-England broadcasters in 1992.
In addition, LWT also owns one- fifth of GMTV, the breakfast channel, along with Carlton and Central Television. Carlton also owns a 20 per cent stake in Central, while Granada has an interest in BSkyB, the satellite network controlled by Rupert Murdoch's News Corporation.
Industry experts say the deals are aimed at giving the companies powerful bargaining chips in an expected shake-up of Britain's commercial television sector from next year. The changes are likely to lead to a big consolidation in the industry.
LWT shares rose 1p to 483p and Granada closed 4p lower at 417p.