Three statements are given followed by three conclusions (I), (II) and (III). You have to take these statements to be true, even if they seem to be at variance from commonly known facts. Decide which of the given conclusions logically follow(s) from the given statements.
Statements:
(1) All books are papers
(2) All pens are papers
(3) All pencils are pens
Conclusions:
(I) All pencils are papers
(II) Some pencils are books
(III) Some papers are pencils

Statements:
(1) All books are papers
(2) All pens are papers
(3) All pencils are pens

​Conclusions:
Conclusion (I): All pencils are papers

Pencils are pens and pens are papers.
So, pencils must be papers.
Conclusion (I) follows.

Conclusion (II): Some pencils are books
There is no direct or indirect relation given between pencils and books.
So this conclusion does not follow.
Conclusion (III): Some papers are pencils

Since all pencils are included in papers, pencils definitely exist within papers.
So, some papers are pencils.
Conclusion (III) follows.

​Thus, correct option is (c).