Held that  the contract between the assessee and AU showed that the payment made by the assessee was directly related to services rendered to customers outside India and income earned therefrom formed part of the assessee’s business. Therefore, it fell under the category of services utilised for a business or profession carried on by such person outside India. The services were carried on outside India by a non-resident for offshore customers because the assessee’s customers were situated outside India and services were utilised for earning income from sources outside India. Therefore, the second part of the exception under section 9(1)(vii) was also satisfied.  The services were not rendered in India, the person to whom the payment was made was a non-resident and finally the amount paid was a business income of the recipient, who did not have any permanent establishment in India. Therefore, payment made to the non-resident towards services rendered in connection with installation and testing services was not chargeable to tax in India as it was covered under the exception to section 9(1)(vii).  Section 195 was not attracted and the question of disallowance under section 40(a)(i) did not arise. The Assessing Officer erred in contending that there should be a permanent establishment or branch office outside India to come under the purview of the exception under section 9(1)(vii)(b), which nowhere mentioned to that effect. Therefore, payment made to a non-resident for rendering contract services outside India came under section 9(1)(vii)(b) and, thus, was not chargeable to tax in India. Hence, the assessee need not deduct tax at source under section 195 on such payment. Consequently, the payment could not be disallowed under section 40(a)(i). As a result, the Commissioner (Appeals) had rightly deleted the additions made by the Assessing Officer. (AY. 2010-11, 2012-13, 2013-14, 2016-17, 2017-18)