ReportViewer working from local but not from the server

Question

We have a Silverlight web application that has reportviewer 2008 in which we call a SSRS report in the remote processing mode. We had it running in the windows 2008 server and it was working fine without any issues.

Now we migrated the application to Windows server 2012 R2. We installed the reportviewer 2008 SP1 package. Report server is working fine. All the application functionalities are working but the reportviewer is not working and giving Unautherised (401) error. The application is running under app pool account.

Application information:

    Application domain: xxx

    Trust level: Full

    Application Virtual Path: /

    Application Path: E:\inetpub\xxx\

    Machine name: xxxx

Process information:

    Process ID: 5900

    Process name: w3wp.exe

    Account name: Domain\user

Exception information:

    Exception type: WebException

    Exception message: The request failed with HTTP status 401: Unauthorized.

Request information:

    Request URL:

    Request path: /Reports.aspx

    User host address: xxx.xx.xx.xxx

    User: xxxxx

    Is authenticated: True

    Authentication Type: 

    Thread account name: Domain\user

Thread information:

    Thread ID: 8

    Thread account name: Domain\user

    Is impersonating: False

    Stack trace:    at Microsoft.SqlServer.ReportingServices2005.Execution.RSExecutionConnection.GetSecureMethods()

   at Microsoft.SqlServer.ReportingServices2005.Execution.RSExecutionConnection.IsSecureMethod(String methodname)

   at Microsoft.SqlServer.ReportingServices2005.Execution.RSExecutionConnection.SetConnectionSSLForMethod(String methodname)

   at Microsoft.SqlServer.ReportingServices2005.Execution.RSExecutionConnection.LoadReport(String Report, String HistoryID)

   at Microsoft.Reporting.WebForms.ServerReport.GetExecutionInfo()

   at Microsoft.Reporting.WebForms.ServerReport.SetParameters(IEnumerable`1 parameters)

   at xxxx

   at System.Web.Util.CalliHelper.EventArgFunctionCaller(IntPtr fp, Object o, Object t, EventArgs e)

   at System.Web.Util.CalliEventHandlerDelegateProxy.Callback(Object sender, EventArgs e)

   at System.Web.UI.Control.OnLoad(EventArgs e)

   at System.Web.UI.Control.LoadRecursive()

   at System.Web.UI.Page.ProcessRequestMain(Boolean includeStagesBeforeAsyncPoint, Boolean includeStagesAfterAsyncPoint)

Please help with the solution. Reportviewer is working fine when connecting to the same report server url from localhost. Is it something to do in the windows server 2012 or reportviewer setup or ???

Thanks,

Saran