Hi @Kumar, Brajesh ,
If we save the doc using save as it allows us to edit but not directly.
Do you mean the file extension of the attachment is .doc which means "Word 97-2003 Document" as illustrated in the table in Office file formats?
If this is the case, seems like currently you would have to use the workaround as you mentioned. Because for 2007 Office system or Microsoft Office 2003 files, only "View-Only" support is provided by the document collaboration experience in Outlook Web App for Microsoft 365. (New Outlook is inspired by OWA so I assume the same applies to New Outlook.)
Reference: Microsoft 365 users can't edit an Office document directly from an email message in Outlook Web App
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