If we do not have an internal e-mail server and the e-mail is received through an ISP e-mail server, can the Kaspersky Anti-virus Upgrade still protect and scan the e-mail when it is being received from an ISP e-mail server?

Yes, you can, all you need to do is enable POP3 proxy virus scan in the SMTP proxy setup. The POP3 proxy virus scan option will not show until you install the anti-virus license.