Assuming that the phrase was taken from this page, the use of is 100% correct and natural.
You cannot use in place of because the direct object of that sentence is NOT . It is []{}[]{} or more formally and appropriately in this context, []{}, which was omitted.
Thus, it is talking about "treating (demonstratives and interrogatives) by lumping them together as independently of parts of speech."
You were correct in sensing that a word was being omitted.