This is a boss fight that comes at the end of the subway station level. You won't have guns, so you'll have to battle Tseng with your fists and feet.
The best way to do this fight is to get Shadow to attack Tseng (up on the D-pad) and then proceed kick and punch Tseng a bunch of times while the dog harasses him.
Tseng's attacks are quite powerful, so don't forget to dodge (X button + direction on left analog stick) them and then hit him a couple more times. Check the combo list and do some of the easier to perform ones when you have an opening.
After a little bit, thugs will enter the arena in pairs: take them out and build your focus meter. When your focus meter is is built up, press LB to activate it and then punch and kick Tseng to do extra damage.
When Tseng's health reaches a certain level, a cutscene will start that shows subway trains rolling down the tracks. Get Tseng over near the guardrail and when a train is getting close, simultaneously press A + X to grab him, and then hit A and push the left analog stick towards the tracks to thrown Tseng. If you do it right, Tseng will go over the guardrail and get hit by an oncoming subway.
Shadow will help you out a lot here, so make sure you revive him when he becomes incapacitated; just make sure no enemies are too close, since they'll get some free shots in while your rescuing the dog.