minecraft:recipe_smithing_transform recipe types require their base to have the minecraft:durability component. This is counter to Vanilla itself: diamond horse armor does not have durability but is transformable to Netherite horse armor.

Demonstration

The attached screenshot demonstrates this issue. A content log error is being emitted on the following recipe definition:

{
  "format_version": "1.26.50",
  "minecraft:recipe_smithing_transform": {
    "description": {"identifier": "bug_recipes:custom_item"},
    "tags": ["smithing_table"],
    
    "template": "minecraft:netherite_upgrade_smithing_template",
    "base": "bug_recipes:custom_item",
    "addition": "minecraft:netherite_ingot",
    "result": "minecraft:netherite_axe"
  }
}

The item in question has the required minecraft:transformable_items tag bug no durability component:

{
  "format_version": "1.26.50",
  "minecraft:item": {
    "description": {"identifier": "bug_recipes:custom_item"},
    
    "components": {
      "minecraft:tags": {"tags": ["minecraft:transformable_items"]},
      "minecraft:icon": "axe",
      "minecraft:max_stack_size": 1,
      "minecraft:wearable": {"slot": "slot.armor.body"}
    }
  }
}

Reproduction

The demo screenshot is taken from the behavior pack in the attached world for convenience. This world can be opened (in Minecraft Preview) for inspection or unzipped to access the code associated with such. Ensure content log warnings are enabled to see the error.