How Would You React In This Situation

This situation could have happened in almost every house hold. Some how I am not able to take it.
My dd is 3 year old and she is very playful and gels up very well with ILs. She goes to their room and plays there with her toys and other stuff whenever we are downstairs (Most of the time she stays with me even though I work). It so happens that MIL would shout at my dd if she does something wrong. I was quite ok with it as she needs to understand right and wrong things. I keep quiet even though this so called shouting goes beyond certain range and sometimes even rude. I just chose to ignore considering it as quite silly and knowing my MILs arrogance. I do not restrict my dd either from going to her.
But today something happened which was very intolerable to me.
My dd recently found it very entertaining to wash her hands and spoon under the tap in between in her meals. She can open the tap but cannot close it because of her height and little confusion as to which side she has to turn it. I keep telling her to close the tap and not to waste water. When I notice, I close the tap.
Today it so happened that she got up in between her meals opened the tap and came back without closing it and I did not notice it either. After sometime MIL came out and shouted at dd so badly with a very high pitch voice that my dd started crying. I inturn shouted at my dd itself that she wouldnt listen to me at all. My H heard what has happened but kept quiet at that moment. I was very badly hurt and I could not see my dd sobbing silently.
My h after coming to our room told me that he has warned his mom not to do this again. Ofcourse after this I had a big argument with my H and I am really pissed off at the moment.
What would you do and how would yor react in such situations.

 

"Sacrifice" ?. Well thats a big word and I am still trying to figure out if that was meant on a sarcastic note or in reality. Well to tell about my MIL, the word "Sacrifice" doesnt exist in her dictionary. Honestly she never thought of extending her support to me anytime of her life including the times when my dad passed away.
Honestly speaking she has developed lot of grudge and hatred towards me. After suffering for a quite a long I have no less negative feelings for her.
Since its a subject of taking care of my child, I would like to say not even a day I was helped. She would do it unwillingly if my H asks her something. When dd was less than a year old and H out of town, she did not hold my child even when I wanted to go to rest room. Instead she criticised my style of giving food to my dd. She bad mouthed about my upbringing methods to BIL. She uses few words which are not acceptable to my daughter (Ex: Kapalamoksham). Scaring out and shouting at her ?(like what she did to me in the beginning) is a big no for me now.
And coming to gifts. I tried and she never seems to be either satisfied or doesnt seem to care. I gifted her good sarees in quite a lot occasions but she did not wear even one and inturn I noticed that she has given it to maid.
All of them bought with her sons choice in his presence.

 

Well the more I started repelling to her MILlish attitude and behavior towards me, the more she started hating me. Initially I was all quiet. And then when I felt enough is enough, I stood up for myself slowly and steadily.
And then I did not spare her she started getting more and more louder.
To give the benefit of doubt I once asked her why cant she speak in a soft voice with me. Her answer was you deserve this kind of rough talk from me and then the war started .
When I questioned her that how can she be so biased just like that with me and cosis she outrightly said that I am intended to separate the family. If any fight starts she would be ready to take on me and I am no less these days.

This is what is happening now. She will be hooked on to devotional books, youtube videos, online geeta classes and then when she finds time she does all that. Only god knows where all that wisdom is going to.

Oh!! By the way did I tell you that she actually intended to pick it up on me when she shouted at my daughter.
Let me narrate the aftermath.
I detailed DH that I had enough in this house and its high time to consider staying separate. I asked h to ask his bro to plan taking his parents to his place. DH said he cannot do that and there was a war of words.
I left the house in haste along with dd. He came to drop me at my moms house.It was early in the morning I was leaving the house and she did not ask why and whats happening. Instead she is asking her son if he has swept the hall or not.
Later DH requested me to come back and mom also said its not right so I had to come back.