$$z_x = \lim_{h \to 0} \cfrac{ f(h,y) - f(0,y)}{h} = \lim_{h \to 0} \cfrac{ (h^2 + y^2) \arctan(y/h) - y^2 \cfrac{\pi}{2} }{h} $$
depending on the sign of $y$ , $\arctan(y/h)$ can be $\pm \pi /2$
but in answer it is stated that the function is differentiable.