I cannot enable/disable 'Do not back up with Time Machine' option, when I close configuration the option reverts back.
Time machine misconfiguration.
On the Mac side click on Apple Logo > choose System Preferences > Time Machine > Options.
If you want to enable Do not back up with Time Machine option:
Exclude Parallels folder from backups by adding (+) the path ~/Documents/Parallels (by default), then click Save.
If you want to disable Do not back up with Time Machine option:
Make sure ~/Documents/Parallels path is not present in the list of exclusions, if it is there, remove it (-).