error ASPCONFIG: It is an error to use a section registered as allowDefinition='MachineToApplication' beyond application level, when adding <hostingEnvironment shadowCopyBinAssemblies="false" /> in web.config file.

I've an azure cloud service web role project. In the csproj file I have the pre-compilation steps to basically pre-compile the asp.net application and generate app_*.dll's. Now I've to add <hostingEnvironment shadowCopyBinAssemblies="false" /> in the web.config file but the build starts failing with error
C:\Users\sharmapulkit\source\repos\AI-AzureCIP\src\ccm\api\CCMApiCloudService\CCMApiWebRole\obj\Websites\bin\web.config(745): error ASPCONFIG: It is an error to use a section registered as allowDefinition='MachineToApplication' beyond application level. This error can be caused by a virtual directory not being configured as an application in IIS.

Below is the csproj file, I've removed the package reference / project reference related sections

<Project Sdk="MSBuild.SDK.SystemWeb/4.0.88" TreatAsLocalProperty="MvcBuildViews;_CreatePackage">

<PropertyGroup>

<SchemaVersion>2.0</SchemaVersion>

<ProjectGuid>{3A51F1D2-AD07-4614-81A1-451FCDDBDB8F}</ProjectGuid>

<ProjectTypeGuids>{349c5851-65df-11da-9384-00065b846f21};{fae04ec0-301f-11d3-bf4b-00c04f79efbc}</ProjectTypeGuids>

<OutputType>Library</OutputType>

<AppDesignerFolder>Properties</AppDesignerFolder>

<RootNamespace>Microsoft.CE.CIP.CCMApiWebRole</RootNamespace>

<AssemblyName>Microsoft.CE.CIP.CCMApiWebRole</AssemblyName>

<TargetFramework>net472</TargetFramework>

<UseIISExpress>true</UseIISExpress>

<EnableWebFormsDefaultItems>false</EnableWebFormsDefaultItems>

<CodeAnalysisRuleSet>$(SRCROOT)\Libraries\RuleSets\AIInfraEng.ruleset</CodeAnalysisRuleSet>

<OutputPath>$(BinariesBuildTypeArchDirectory)\$(AssemblyName)</OutputPath>

<OutDir>$(OutputPath)</OutDir>

<WebsitePath>$(BaseIntermediateOutputPath)Websites</WebsitePath>

<CompiledSitesPath>$(BinariesBuildTypeArchDirectory)\WebRole\$(TargetFramework)\CompiledSites</CompiledSitesPath>

<CompiledWebsitePath>$(CompiledSitesPath)\WebRole</CompiledWebsitePath>

<CodeAnalysisIgnoreGeneratedCode>false</CodeAnalysisIgnoreGeneratedCode>

<CodeAnalysisTreatWarningsAsErrors>true</CodeAnalysisTreatWarningsAsErrors>

<GeneratedBindingRedirectsAction>Overwrite</GeneratedBindingRedirectsAction>

<RunCodeAnalysis>false</RunCodeAnalysis>

<IISExpressSSLPort></IISExpressSSLPort>

<IISExpressAnonymousAuthentication />

<IISExpressWindowsAuthentication />

<IISExpressUseClassicPipelineMode />

<UseGlobalApplicationHostFile />

<ResolveAssemblyWarnOrErrorOnTargetArchitectureMismatch>None</ResolveAssemblyWarnOrErrorOnTargetArchitectureMismatch>

<TargetFrameworkProfile />

<Use64BitIISExpress>true</Use64BitIISExpress>

<DeployOnBuild>true</DeployOnBuild>

<PrecompileBeforePublish>false</PrecompileBeforePublish>

<EnableUpdateable>false</EnableUpdateable>

<WDPMergeOption>DonotMerge</WDPMergeOption>

<MvcBuildViews>false</MvcBuildViews>

<TransformWebConfigEnabled>true</TransformWebConfigEnabled>

<_CreatePackage>false</_CreatePackage>

</PropertyGroup>
<Target Name="CopyFiles" AfterTargets="Build" BeforeTargets="PrepareToPrecompileWeb">

<CreateItem Include="$(TargetDir)***">

<Output ItemName="MyBuiltFiles" TaskParameter="Include" />

</CreateItem>

<Copy SourceFiles="@(MyBuiltFiles)" DestinationFiles="@(MyBuiltFiles->'$(ProjectDir)\bin%(RecursiveDir)%(Filename)%(Extension)')" SkipUnchangedFiles="true" />

</Target>

<Target Name="PrepareToPrecompileWeb" AfterTargets="CopyFiles" BeforeTargets="BeforePrecompileWeb">

<RemoveDir Directories="$(WebsitePath)" />

<CreateItem Include="$(TargetDir)**" Exclude="$(TargetDir)*\app_global.asax.dll;$(TargetDir)**.compiled;$(CompiledSitesPath)**.*">

<Output ItemName="WebBuiltFiles" TaskParameter="Include" />

</CreateItem>

<Copy SourceFiles="@(WebBuiltFiles)" DestinationFiles="@(WebBuiltFiles->'$(WebsitePath)\bin%(RecursiveDir)%(Filename)%(Extension)')" SkipUnchangedFiles="true" />

<ItemGroup>

<WebsiteRoot Include="Global.asax" />

<WebsiteSvc Include="*.svc" />

<WebsiteConfig Include="Web.config" />

</ItemGroup>

<Copy SourceFiles="@(WebsiteRoot)" DestinationFolder="$(WebsitePath)" />

<Copy SourceFiles="@(WebsiteSvc)" DestinationFolder="$(WebsitePath)" />

<Copy SourceFiles="@(WebsiteConfig)" DestinationFolder="$(WebsitePath)" />

</Target>

<Target Name="BeforePrecompileWeb" AfterTargets="PrepareToPrecompileWeb" Condition="'$(BuildingInsideVisualStudio)' != 'true'">

<Exec Command="attrib +H "$(WebsitePath)\bin*.h" /S" />

<Exec Command="attrib +H "$(WebsitePath)\bin\web.config" /S" />

<!-- <Exec Command="attrib +H "$(ProjectDir)\obj\Debug\Package\PackageTmp\bin*.h" /S"/>

<Exec Command="attrib +H "$(ProjectDir)\bin*.h" /S" /> -->

</Target>

<Target Name="PrecompileWeb" AfterTargets="BeforePrecompileWeb" Condition="'$(BuildingInsideVisualStudio)' != 'true'">

<AspNetCompiler ToolPath="$(MSBuildFrameworkToolsPath64)" PhysicalPath="$(WebsitePath)" VirtualPath="/" TargetPath="$(CompiledWebsitePath)" Force="true" FixedNames="true" />

<!-- The following will catch and fail build if app_.dll is not generated as expected. Add similar check for app_web_.dll if needed -->

<ItemGroup>

<AspNetDLLs Include="$(CompiledWebsitePath)\bin\app_*.dll" />

</ItemGroup>

<Error Text="aspnetcompiler task did not generate compiled app_global or app_web assemblies" Condition="@(AspNetDLLs->Count()) == '0'" />

<ItemGroup>

<CompiledAsax Include="$(CompiledWebsitePath)\bin\app_global.asax.dll" /> <CompiledSvc Include="$(CompiledWebsitePath)\bin\*.compiled" /> <CompiledAppConfig Include="$(CompiledWebsitePath)\PrecompiledApp.config" />

</ItemGroup>

<Copy SourceFiles="@(CompiledAsax)" DestinationFolder="$(TargetDir)" />

<Copy SourceFiles="@(CompiledSvc)" DestinationFolder="$(TargetDir)" />

<Copy SourceFiles="@(CompiledAppConfig)" DestinationFolder="$(TargetDir)" />

</Target>

<Target Name="AfterPrecompileWeb" AfterTargets="PrecompileWeb" Condition="'$(BuildingInsideVisualStudio)' != 'true'">

<Exec Command="attrib -H "$(WebsitePath)\bin*.h" /S" />

<Exec Command="attrib -H "$(WebsitePath)\bin\web.config" /S" />

<!-- <Exec Command="attrib -H "$(ProjectDir)\obj\Debug\Package\PackageTmp\bin*.h" /S" />

<Exec Command="attrib -H "$(ProjectDir)\bin*.h" /S" /> -->

</Target> </Project>