Permanent establishment profit attribution limits taxation to attributable profits and governs deductions under arm's length treatment. Under the DTAA, only profits attributable to a permanent establishment in the other Contracting State may be taxed there; attribution treats the permanent establishment as a distinct and separate enterprise under similar conditions using an arm's length approach. Deductions include expenses incurred for the permanent establishment's business, but non reimbursement charges between the establishment and other offices-such as royalties, fees, commissions, management charges and, except for banks, interest-are not deductible or taken into account. Purchases alone do not create attributed profits, and the chosen attribution method should be applied consistently year to year.