The advertisement was released in September by the Meat and Livestock Australia (MLA), triggering widespread protests from the Indian community in the country as well across the globe.
Members of the Hindu community of Australia filed a complaint with the Advertising Standards Bureau (ASB) at that time claiming it had hurt their religious sentiments.
The advertisement also prompted the Indian High Commission in Canberra to lodge a complaint with the Australian government asking for its removal.
Initially the Advertising Standards Bureau found that the advertisement by the MLA was not in breach of code.
Considering several points of submission, the board said "after taking into account the Independent Reviewer's finding that the board gave insufficient weight to the views of complainants in regards to the Elephant Comment, the board determined that the advertisement breached section 2.1 of the Code and upheld complaints."
According to the latest decision, the board noted "Lord Ganesha was a deity that signified perfection so to criticise his appearance would be likely to be seen as ridiculing the Hindu religion and by extension some followers of that faith."
"The majority of the board therefore considered that the Elephant comment amount to a depiction or portrayal of material which discriminated against a person on account of their Hindu religion," the Advertising Standards Bureau noted.
It further noted that the reference made in the advertisement about 'elephant in the room' was a tongue in cheek way of referring to an unpleasant or negative issue.
The advertisement is no longer being broadcast. However, the MLA maintains its advertisement does not discriminate against anyone.
Reacting to the Advertising Standards Bureau's latest decision, Melbourne-based Hindu community member Karthik Arsu said, "This is a Great Victory for the entire Hindu Community. The community got united and each and every one contributed to fight against a giant like Meat & Livestock Australia, we lost in the complaint process, but we stood together and persisted,"
"So happy to receive this good news, still not sure how it will transpire in getting that derogatory advertisement removed from online platforms, but the whole community is feeling ecstatic!," he said.
"The decision reinforces the belief that no one can denigrate a community in Australia on the basis of religion, colour or the size of the community!," he added.
According to Jay Shah of Overseas Friends of Bharatiya Janata Party (OFBJP), Australia "the advertisement was very hurtful and I am happy that ASB accepted my review plea and gave a decision in support of Hindu community."
Describing the decision as "good", Hindu Council of Australia said "at last a genuine complaint has been addressed though it is late resolution... It would likely to set a precedent for not to use religious icons inappropriately for any purpose."
Earlier, the Advertising Standards Bureau had dismissed complaints that the advertisement breached any code saying that Lord Ganesha was depicted positively and that the intent was to be inclusive.