You're absolutely right, it is. It's just that a logical extension of that ruling (or possibly an unintended consequence?) Is that schools can't give priority to DCs living in their own LEA (as they then were). And if they can't do that, they can't give priority to anyone based purely on where they live.
Individual schools can, however, have use catchment areas as a criterion provided they aren't in breach of the Greenwich Judgment. So this has led to the rather farcical state we are in now, whereby a school can't prohibit anyone from taking the test but can refuse them a place based on where they live.