Theme Horse

hi mbrija,

Once you activate the other WordPress default theme(twentyfifteen, twentyfourteen etc) and try to upload the image whether it works or not.

Once you may try this below plugins too:
http://wordpress.org/extend/plugins/pjw-mime-config/
or
https://wordpress.org/plugins/ap-extended-mime-types/

View this tutorial for more info
http://ask.xmodulo.com/this-file-type-is-not-permitted-for-security-reasons.html

Thank you!