First, the underlined portion begins with the singular pronoun "it." Logically, "it" must refer to "Lithuanian," since this is the language that is descended from Proto-Indo-European. However, "Lithuanian" is not a noun to which the pronoun can refer. It does appear earlier in the sentence, but as an adjective describing "words." Therefore, the pronoun lacks an antecedent. Furthermore, the sentence then uses "them." Logically, "them" should refer to "Lithuanian words," but the closer noun is "words in Proto-Indo-European." Thus, this pronoun lacks a clear antecedent. The correct answer will address both these issues without introducing new errors.
The choices vary at the beginning. (A) start with "it," (B) and (C) start with "Lithuanian," (D) starts with "they," and (E) starts with "there is." There is also a 3-2 split at the end between "other Indo-European languages" in (A), (C), and (E) and "another Indo-European language" in (B) and (D).
For the reasons noted above, eliminate (A).
By changing "languages" at the end to "language," (B) and (D) slightly alter the meaning of the original sentence. This writer is discussing a process of comparing words across languages descended from Proto-Indo-European, triangulating their features to reconstruct words in the extinct language. You can eliminate both choices on this basis. You might also note that both (B) and (D) use the present tense "descend(s)," suggesting that the Lithuanian words are in the process of deriving their current form and meaning from Proto-Indo-European right now. This does not reflect the meaning of the sentence.
Also, the position of "it" in (B) makes this pronoun refer to "Lithuanian." However, one cannot "compare [Lithuanian] to ... words." The sentence must compare a language to other languages or words to other words.
(D) has other problems as well: the placement of "they" indicates that words in Proto-Indo-European are descended from Proto-Indo-European, which makes no sense. Even if "they" clearly referred to "Lithuanian words," the sentence would say that words descended from a language, which is not parallel. The pronoun "them" that follows also seems to refer to Proto-Indo-European words, but these words cannot be compared to those in "another" Indo-European language because Proto-Indo-European is not an Indo-European language—it's Proto, after all.
Move on to evaluate (C) and (E). (E) avoids using the initial pronoun by employing the passive and ambiguous "there is descent." What descends from Proto-Indo-European? Eliminate.
Choice (C) correctly begins with the noun "Lithuanian," so there is no ambiguity and the sentence describes a language descending from another language. It likewise replaces "them" with "Lithuanian words." The Lithuanian words are sensibly compared to words in multiple other Indo-European languages. The verb "is descended" places the descent in the past. This choice is the winner.
TAKEAWAY: When the underlined portion starts with a pronoun, examine it carefully to make sure it unambiguously refers to a noun and matches that noun in number. Then make sure the answer you pick uses all pronouns correctly or replaces them with nouns.