Referencing these commands:
; 1
(require 'filenotify)

; 2
(defun my-callback (directory)
  (message (format "called %s" directory)))

; 3
(file-notify-add-watch "/private/tmp"  '(change attribute-change) 'my-callback)

; 4
(file-notify-add-watch "/tmp"  '(change attribute-change) 'my-callback)

Starting with a fresh emacs -Q, if I execute lines 1, 2, and 3 and then
touch a file such as /tmp/OUT, I get the notification as I should.

However if I start fresh, execute lines 1, 2, and 4, and touch /tmp/OUT,
I do not get a notification.

On a Mac, /tmp is a symbolic link to private/tmp (relative path).

I first discovered this issue using Helm's find-file and I entered a
report with Helm.  The Helm developer reports that it works in his case
with Linux.

I'm using a new M1 Mac, macOS 12.5.1 and using the newish AFS.  I built
this emacs myself so it might be pilot error with my build but that
seems less likely since file notify does generally work but not when the
watched file is a symbolic link to a directory.

Also, this is not /tmp => private/tmp specific.  I can recreate the same
issue using ~/Desktop/Dog/tmp and a symbolic link ~/Desktop/tmp that has
a relative path of Dog/tmp and I get the same issue.

In GNU Emacs 28.1 (build 1, aarch64-apple-darwin21.4.0, NS appkit-2113.40 Version 12.3.1 (Build 21E258))
of 2022-04-04 built on Peace.lan
Repository revision: bffd375b378025c8f5fd947fdac8ed710cb980d7
Repository branch: master
Windowing system distributor 'Apple', version 10.3.2113
System Description:  macOS 12.5.1

Configured features:
ACL GNUTLS LCMS2 LIBXML2 MODULES NOTIFY KQUEUE NS PDUMPER PNG THREADS
TOOLKIT_SCROLL_BARS ZLIB

Important settings:
  value of $LANG: en_US.UTF-8
  locale-coding-system: utf-8-unix

Major mode: ELisp/d

Minor modes in effect:
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  magit-auto-revert-mode: t
  global-rbenv-mode: t
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  display-time-mode: t
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  shell-dirtrack-mode: t
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  tooltip-mode: t
  global-eldoc-mode: t
  eldoc-mode: t
  show-paren-mode: t
  electric-indent-mode: t
  mouse-wheel-mode: t
  menu-bar-mode: t
  file-name-shadow-mode: t
  global-font-lock-mode: t
  font-lock-mode: t
  blink-cursor-mode: t
  auto-composition-mode: t
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  line-number-mode: t
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Load-path shadows:
/Users/pedz/.config/emacs/el-get/lua-mode/init-tryout hides /Users/pedz/.config/emacs/el-get/ample-regexps/init-tryout
/Users/pedz/.config/emacs/el-get/transient/lisp/transient hides /Applications/Emacs.app/Contents/Resources/lisp/transient

Features:
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epa-hook jka-cmpr-hook help simple abbrev obarray cl-preloaded nadvice
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overlay sha1 md5 base64 format env code-pages mule custom widget
hashtable-print-readable backquote threads kqueue cocoa ns lcms2
multi-tty make-network-process emacs)

Memory information:
((conses 16 792904 71749)
(symbols 48 42889 12)
(strings 32 204756 30906)
(string-bytes 1 7937607)
(vectors 16 88687)
(vector-slots 8 1724598 211160)
(floats 8 529 451)
(intervals 56 79268 873)
(buffers 992 91))