Step 1: Understanding the Concept
Azotobacter is a free-living, aerobic, non-photosynthetic nitrogen-fixing bacterium that does not form nodules.
Step 2: Statements I and II
Both describe it correctly.
Step 3: Statements III and IV
The biofertilizer for legumes is Rhizobium, not Azotobacter, which is used for non-leguminous crops. So III is wrong.
Gymnosperm roots are associated with mycorrhiza, not Azotobacter. So IV is wrong.
Final Answer:
Statements I and II are correct and III and IV are incorrect.
\[ \boxed{\text{(C) }\text{Statement (I) and (II) are correct but (III) and (IV) are incorrect}} \]