Look at it. Is it part of it's body or are they arms?
No, I think it was
1) The way GameFreak envisioned it in 1st Gen
2) They were to help it hang on to a tree.
Yes it does have arms. Since its scythe like arms are useless, it keeps its arms tucked in. They are arms. They use it to hang on trees so it can rest while preparing to evolve. Sugimori and all of those people said the they do have arms, but nintendo decided to have them tucked in. This is why the arms are not clear now, but they do have arms.