The way I interpret that reg (and it's always possible I'm wrong, but this is how I understand it), is that if ts39136 has a student pilot certificate and medical, then he is a pilot, and he can be instructed by an ATP in "air transportation service" in the aircraft that the ATP is properly rated in.

The instruction can't count towards his PPL rating (for example), because he's being instructed in "air transportation service", not the tasks needed for a PPL, but it's still instruction that can be logged for TT and PIC.

If the PIC of the jet is also an MEI, then any instruction is fair game without question.