How I think I would handle it - I would calmly and gently get down to child's level and explain that your DD is playing with it and when she's finished then she will put it back for other child to play with.
How I probably would handle it - do what you did!!
Sometimes we do what is easiest at the time. Our kids are resilient and they understand that injustice occurs. But it doesn't mean that they will try that behaviour on later to get their way.