Once the project gets sanctioned, multiple of head of accounts are generated under various categories for funding. I am sure that MkII project also had some funds allocated for Pre-project activity/R&D/development of jigs etc. under which non-engine related developments could go on.
Coming to the Engine part, it looks ridiculous that the GoI put the condition for 100% ToT for the GE-engine as getting this will involve diplomatic heavy-lifting from MEA and other stake-holders of inter governmental relationship between the US & India. Why to sanction the project at first place when ToT is not done - that would have been the first question that will strike the CCS while deliberating on the approval of MkII.
Setting aside all shenanigans/conspiracy theory, IMO, it looks more like Modi govt. trapped the ADA on its own pitch for producing GE-414 engines locally to power MKII. Unfortunately, ADA has no choice other than GE-414 around which it has designed the MKII so they have to close agreement with GE with whatever ToT they are offering for assembly of GE engines in India.
This reminds me of MP-ATGM project which were close enough of getting signed in favor of Spike ATGM with local assembly with some private player. Some esteemed scientists of DRDO, while attending DAC circa 2017-18 has promised to develop similar indigenous ATGM solution within 2 years as an alternate of Spike. The SPIKE was ultimately purchased off-the-shelf in 2019-2020 through Emergency purchase and we are yet to see indiIgenous MP-ATGM fully developed and poised for induction into armed forces. The trials are still going on & on. I hope that ATGM saga will not repeat this time for MkII.
What we need, in the likes of National Semi-conductor mission etc., a similar program for development of indigenous fighter program with dedicated funding separate from IAF/defence budget just as in case of other strategic programs. And Tejas MkII fits the bill as it will be a standard 4++ fighter suitable for air patrolling and interdiction missions and it will not involve herculean exercise as in case of developing a true 5th Gen fighter. Just produce the MkII in numbers and let the ecosystem of suppliers from private industry develop which will be useful for other advanced fighter programs.