web app not able to resolve VMs in ARM vNet

I created a virtual network and a VM inside it. configured vnet with P2S VPN and successfully able to connect to it via my laptop.

Then I connected an azure web app to the vNet using P2S. The portal shows it is connected and I am able to tcpping the VM using internal IP address BUT when I select internal dns name of VM (sqlvm.v2suoverxwoetlsx50noqrulfg.dx.internal.cloudapp.net) then tcpping fails to connect. I am using azure provided DNS in my vNet.

The exact scenario works fine if the vNet is classic. Any idea?

https://www.linkedin.com/in/gangwar