Grab the Empty named Source (shaped like a Cube) 2.5 meters along X axis. Empty named Destination is properly rotated (like in Transformation Constraint - ranging from 0 to 2.5 rotates Destination -45 Degrees. Here all the fun begins, grab the Empty named Source again 2.5 meters along X axis and look wthat's happening. Empty named Destination should move 1 meter along Local Z axis as set in Transformation Constraint (Space Local Space <-> Local Space). As you can see Empty named Destination move 1 meter in Global Space instead of Local.