S2 select line is output OR gate .So C+1=1 , C+0 = C whatever value of C will be output will be 1. So S2 will always be 1.
In the above MUX : X0,X3,X5,X6 are active high .
By using characteristic equation of MUX -
Y = E' ( S2'S1'S0' X0 + S2'S1S0 X3 + S2S1'S0 X5 + S2S1S0' X6 ) I have not included rest all becoz they are active low .
In the above equation E =0 and S2 will always be 1. so X0 and X3 terms become 0 , X5=1,X6=1
So the final output will be ->
Y = S1'S0 + S1S0' => A'B + AB' i.e A XOR B.