Late or inadvertant?

[DJ]

Over the holidays we were working an area tournament. A
tightly contested championship game in the fourth quarter and one of our guys blew his whistle to signal a timeout only to find out that the team that wanted the time out was no longer in possession of the ball and that the other team had intercepted the pass and instantaneously had made another pass to a teammate (a truly late whistle). Since we signaled timeout, should the team be allowed their time out because of the whistle? We allowed the timeout and then awarded the ball to the other team because they were in possession of the ball when this truly late whistle echoed throughout the gym. Not a pretty sound to say the
least. Should we have denied the timeout? If we granted the timeout should we have given the ball back to the team signaling timeout? What does common sense and the rule book allow? It is usually pretty easy to handle situations that are covered by the rules but when we screw up it is not always easy to correct the dreaded uncorrectable errors!! In our case, awarding the timeout and giving the ball back to the team that had made a good play to intercept the pass appeased the coaches, players and fans because nobody said boo but that doesn't mean that our
diplomatic solution was the correct thing to do! Any ideas on correct protocol?