TejasK,

Do you have another control using a smartobject as a data source configured already?  I ran into the same issue as you did, but once I configured another control using a smartobject the option appeared.

I'd reccomend setting up the field you wish to "filter" with first, then attempting to configure the final selection.

Let me know if that gets you started, I'll keep digging for a more "formal" answer.

-Mike

Edit:  The 200.YUL guide (http://help.k2.com/files/4718) doesn't explain the exact restrictions on when that filter option is available, however, it does mention the following:

     4. Set up the Filter option for the next-level drop-down menu
     Once you have set up each drop-down lists data source, go to the second drop down menu, and then use
     the Filter the data according to another control’s value checkbox to filter the list of countries based on
     the ID of the value selected in the Regions drop down list, as shown below:

Thanks Mike, It works now :)