Hello @Irshad Ahmad (APMEA - iCORE-CIS) ,
Thank you for reaching out to Microsoft QnA Platform.
Looking at the above screenshot, it looks like you are trying to create the VM inside the already existing resource group compute-rg. I can see there is some Policy applied which is disallowing the request. You can check the Policy definition by clicking on 'Policy details' and check which Policy is prohibiting you to create the VM in the resource group of 'compute-rg' and what is the effect and scope of the policy.
Usually Policies can be applied to any scope of resources that Azure support, such as management groups, subscriptions, resource groups, or individual resources.
Please refer to the link for more understanding : Azure Policy
You can edit the Policy definition as per your own requirement or create Exemptions as shown below.
Here, as you can see I am adding an exemption to my 'custom-policy' which is applied at subscription level, and I am exempting the resource group 'sreejalab' from the policy.
I hope this helps you.
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