Even though everyone remembers the scene as being the Joker and Batman, Gordon played a very important part to setting it up and allowing this interrogation to happen. And then as he is watching from the sideline, he sees the exact point where this is going too far. He knows Batman well enough to observe this, to recognize it. He tries to get in, but Batman has locked the door. And what we get to lead to, by the end of the scene, when he’s just pounding on the Joker, I think Heath managed to find the exact essence of the threat of the Joker and who he is: He’s being pounded in the face and he’s laughing and loving it. There’s nothing you can do. As he tells Batman, “You have nothing to do with all of your strength.” There’s this sort of impotence of the strong and the armored and the very muscular Batman; he’s very powerful, but there’s no useful way for this power to be exercised in this scene. He has to confront that.
Originally, at the end of that scene, once the Joker reveals his information, Christian dropped him and then, almost as an afterthought, he kicked him in the head as he walked out of the room. We wound up removing that bit. It seemed a little too petulant for Batman in a way. And really, more than that, what it was is that I liked how Christian played it: When he drops the Joker, he has realized the futility of what he’s done. You see it in his eyes. How do you fight someone who thrives on conflict? It’s a very loose end to be left with.
http://herocomplex.latimes.com/uncategorized/christopher-n-1/
This is from Chris Nolan the director. So sure he stops short of killing him but the fact is the Joker is reveling in the fact that he has pushed Batman to the brink. Sure he would have loved for Batman to go over the edge completely or to kill him but the fact he's brought him to the edge and Batman looks into the abyss and realizes the futility of it all is the moment of victory.
This is borne out by the fact that even after beating the crap out of the Joker to reveal where Rachel and Dent are, Batman still fails. The Joker still manages to send Batman after the wrong person as Batman thinks he's going after Rachel but instead the Joker sent him after Dent. In the end Rachel dies without him there to save her and Dent is horribly scarred and becomes the villain Two Face.
So if this is the pivotal scene of the movie as the Director notes, Batman has lost. He has lost because while he doesn't go over the edge in killing the Joker, the end result of this scene is he loses the woman he loves and he loses the guy he had hoped would be the true savior of Gotham. The fact that the Joker is caught afterwards is no great triumph because in the end the damage is already done.
I mean if you think of this in simple terms. The Joker is more happy in prison secure in the knowledge of having taken away the things Batman cares about than Batman is living free.