**Core Concept**
The question revolves around the concept of culpable homicide not amounting to murder, which is a crucial aspect of the Indian Penal Code (IPC). Section 299 of the IPC defines culpable homicide as causing the death of another person with the intent to cause death or with the knowledge that death or grievous hurt will be a probable consequence of such act. However, if the act does not result in death, it may still attract sections dealing with grievous hurt.

**Why the Correct Answer is Right**
In this scenario, Mr. X fired a gun at Mr. Y, but the bullet only grazed his arm, causing little bleeding and no significant injury. Although the intent to cause harm or death was present, the act did not result in death or grievous hurt. According to Section 319 of the IPC, "whoever causes bodily pain, disease or infirmity to extend to permanent privation of the sight of either eye, or to permanent privation of the hearing of either ear, or to privation of any member or joint, shall be punished with imprisonment of either description for a term which may extend to ten years, and shall also be liable to fine." However, Section 324 of the IPC deals with voluntarily causing hurt by dangerous weapons or means, which is more applicable in this situation. Since the bullet grazed Mr. Y's arm, it can be considered a dangerous weapon, and Mr. X's act falls under Section 324.

**Why Each Wrong Option is Incorrect**
**Option A:** Section 302 of the IPC deals with punishment for murder, which is not applicable in this scenario since Mr. Y did not die.

**Option B:** Section 304 of the IPC deals with punishment for culpable homicide not amounting to murder. However, this section is more applicable when the act results in death, which is not the case here.

**Option D:** Section 326 of the IPC deals with voluntarily causing grievous hurt by dangerous weapons or means. Although the bullet was a dangerous weapon, the injury caused was not grievous.

**Clinical Pearl / High-Yield Fact**
When dealing with cases of assault or grievous hurt, it is essential to determine the nature of the injury and the intent of the perpetrator. This can help in applying the correct section of the IPC and determining the appropriate punishment.

**✓ Correct Answer: C. 324**