Step 1: Recall the state of the Habsburg Empire.
The Habsburgs ruled over many different peoples, and by the 1860s nationalist pressure and military defeats had weakened their hold.
Step 2: Identify the 1867 arrangement.
The Compromise of 1867, or Ausgleich, turned the empire into the Dual Monarchy of Austria-Hungary, giving Hungary its own parliament and control over internal affairs.
Step 3: Eliminate the other options.
England was never part of the Habsburg lands, Italy was fighting for its own unification, and Russia was ruled separately by the Romanovs, so none of them received this autonomy.
Hence, the correct answer is option (C) Hungary.