One of MVP figured out the root cause of the error and I would like to share it. We had custom culture installed on the server which is used for Epic Application Reporting where in the regional settings was set to English (U.A.E.). I reverted the regional settings of the OS to English (United States) and the error disappeared. However, the setup files seems to be corrupt as I am getting the file format error. I will copy the ISO directly on the server and extract it via WinRAR as suggested.
Regards Mohammed