Found a solution for my error:
in the folder c:\inetpub\wwwroot I had a folder with the same name I wanted the Application to have
something like:
C:\inetpub\wwwroot\TestWebsite
in IIS this wasn't an application but was showing as a folder
when I tried to create an application in IIS with Alias TestWebsite, was giving me that error even when was in a completely different physical path
check there is no folder with the same name as the Alias for the application you are creating in the wwwroot folder
wasn't permissions in my case
hope it helps someone
I also recommend removing the Alias from IIS using command appcmd located in C:\Windows\System32\inetsrv see this link explaining how
