The correct option is
B Intracellular
In sponges, cells take in whole food particles inside directly from the environment by various processes like diffusion, active transport, endocytosis. Once the food reaches inside, it breaks down with enzymes to obtain nutrients. This process is known as intracellular digestion. This type of digestion also occurs in Cnidarians, protists etc.Intracellular digestion is different from extracellular digestion which is the enzymatic breakdown of larger pieces of food into smaller diffusable molecules. Hence, the correct answer is option B.