'The' makes a common noun proper.

What is THE among the nine parts of speech in the above sentence?

In my opinion it is used as a NOUN in this sentence. Because THE here refers to a word of English Language. And if you recall the definition of a noun it is the name of any person, place or thing. Here THING refers to any thing we can think of. So THE in this instance is a thing (a word) formed of three alphabets T,H and E.

But my friends don't agree. Please help me out. Whether I am correct or not?

I agree with you.

Quoted words can function as nouns in a sentence. For example

Synonyms of "nice" are "pleasant" and "kind."

In it's normal usage, "nice" is an adjective, but in this sentence and the one above it is a noun, the subject of the verb "is," and the object of the preposition "of."

The part of speech of a word or phrase is determined solely by a lexical analysis of its function in a sentence. Here is the Wiki definition of noun.

In linguistics, a noun is a member of a large, open lexical category whose members can occur as the main word in the subject of a clause, the object of a verb, or the object of a preposition (or put more simply, a noun is a word used to name a person, animal, place, thing or abstract idea).

In your sentence:

'The' makes a common noun proper.

The verb is make and the subject is 'the.'

That makes 'the' in this sentence (the abstract idea of a particular word), a noun.