First understand the terminology of Profit and loss chapter like CP, SP,MP, Discount etc . and then Just try to relate the mathematical part with the sentence part. Just try to visualize what the question saying.

Given : $MP$ is $1200$ and $MP$ is $20\%$ above $CP$. ( here they are talking about % with respect to CP and not MP)

$\Rightarrow$ $CP + 20\% CP$ = $MP$

$\Rightarrow$ $\frac{6}{5}CP =1200$

$\Rightarrow$ $CP = 1000$

$Discount$ = $10\%$ on $MP$ = $\frac{1}{10} *1200 = 120$

$SP$ = $MP - Discount $ = $1200 - 120$ = $1080$

The story goes like this

The shopkeeper bought the table at Rs $1000$(CP) and told that I will sell it at Rs $1200$(MP)

One customer came and bought it at Rs $1080$(SP) after getting a discount of Rs $120$.

So the $profit\ earned\ by\ shopkeeper$

=$the\ price\ at\ which\ he\ sold\ - the\ price\ at\ which\ he\ bought$

= $1080 - 1000$

= $Rs\ 80$

So $Profit\% = \frac{Profit}{CP} * 100\% = \frac{1080-1000}{1000} * 100\% = \frac{80}{1000} * 100\% = 8 \% $

(NOTE :- Profit % is always calculated wrt to CP )

$\therefore$ Option $B$. $8\%$ is the correct answer.