It would be great to use setools-4.6.0/ as dist directory. It looks like it's also the default:
$ python3 ./setup.py sdist --formats bztar
$ tar tfvj dist/setools-4.6.0.tar.bz2
drwxr-xr-x plautrba/plautrba 0 2025-09-09 10:35 setools-4.6.0/
-rw-r--r-- plautrba/plautrba 474 2024-04-23 11:42 setools-4.6.0/COPYING
-rw-r--r-- plautrba/plautrba 18092 2024-04-23 11:42 setools-4.6.0/COPYING.GPL