Not able to install external template

I am using hostgator for hosting my website and use /blog directory for installation. After installing wordpress through Fantastico all went good and I got the default wordpress blog. But when I uploaded the theme through wordpress it says (It is not there what you are trying to find), even after activating it.

I am doing correct installation and it is showing the name of theme as well but I am not able to see it on my domain.

My friend purchased it few days back and I got it from my friend.

Please help, I am totally confused because I am not missing any step of installation.