Observe one thing, Overflow can occur when we add two negative numbers or two positive numbers. When we add one negative and one positive number, there can't be an overflow.
Now when we add two positive numbers, result should always be positive and when we add two negative numbers, result should be negative, In representation of signed binary numbers, MSB represents sign of number.
1. Now if MSB of both input numbers is 1 (means numbers are negative) but MSB of sum is 0 (means sum is positive) then it means there is an overflow.
2. Similarly, when MSB of both inputs is 0 (means numbers are positive), but MSB of sum is 1 (means sum is negative), then it also indicates overflow.
Statement 1 above indicates, A'7B'7S7 is 1. Statement 2 above indicates A7B7S'7 is 1.
Hence Option C is answer