Business profits taxation limited to residence state unless attributable to a permanent establishment, enabling source-state taxation. Business profits are taxable only in the resident State unless business is carried on in the other State through a permanent establishment, in which case only profits attributable to that permanent establishment may be taxed by the other State. Attribution follows the separate enterprise principle, allowing deductions for expenses incurred for the permanent establishment subject to the rule that expenses not deductible for a separate enterprise are not permitted; administrative expenses are allowed under the taxation law of the State where the permanent establishment is situated.