Business profits attributable to a permanent establishment may be taxed by the host state under DTAA allocation rules. Article 7 provides that an enterprise's profits are taxable only in its residence State unless it carries on business in the other Contracting State through a permanent establishment; where a PE exists, only profits directly or indirectly attributable to that PE may be taxed there. Profits attributed to a PE are determined by the separate enterprise standard, allowing deductions for PE business expenses subject to host State tax law limitations, permitting customary apportionment consistent with the Article, excluding mere purchase activity from attribution, and requiring consistency of attribution method year to year.