Assuming you have a file called file.xml, containing:

<annotation>
    <folder>all_images</folder>
    <filename>0.jpg</filename>
    <path>/home/vishnu/Documents/all_images/0.jpg</path>
    <source>
        <database>Unknown</database>
    </source>
    <size>
        <width>4250</width>
        <height>5500</height>
        <depth>1</depth>
    </size>
    <segmented>0</segmented>
    <object>
        <name>word</name>
        <pose>Unspecified</pose>
        <truncated>0</truncated>
        <difficult>0</difficult>
        <bndbox>
            <xmin>308</xmin>
            <ymin>45</ymin>
            <xmax>502</xmax>
            <ymax>162</ymax>
        </bndbox>
    </object>
</annotation>

Then the following Python script in the same folder gives you an idea how to use the Standard Library ElementTree API to parse the file:

import xml.etree.ElementTree as ET

tree = ET.parse("file.xml")
root = tree.getroot()

print(root.find("./folder").text)
print(root.find("./object/name").text)
print(root.find("./object/bndbox/xmin").text)

You will need to work out how to write the values to your own text files, but that should be straightforward. There are lots of resources such as this one.

Edit: updated now that OP's included his Python code.

Your problem is that lxml.etree.tostring and also the .write method are only meaningful on XML, not on an XSLT result with output method="text" which might not have a single root element like XML does. For some confusing reason, the functions do have a method= keyword argument but it does not do anything useful.

This is what you should do:

import lxml.etree as etree
data = etree.parse('data.xml')
transform = etree.XSLT(etree.parse('txt.xslt'))
res = transform(data)
bytes(res)

b'\nCEO and 1Director of Operations and 2Human Resources Manager and 3\n'

If you're interested in a real world example, I recently made a patch.

There is already a built-in XML library, notably ElementTree. For example:

>>> from xml.etree import cElementTree as ET
>>> xmlstr = """
... <root>
... <page>
...   <title>Chapter 1</title>
...   <content>Welcome to Chapter 1</content>
... </page>
... <page>
...  <title>Chapter 2</title>
...  <content>Welcome to Chapter 2</content>
... </page>
... </root>
... """
>>> root = ET.fromstring(xmlstr)
>>> for page in list(root):
...     title = page.find('title').text
...     content = page.find('content').text
...     print('title: %s; content: %s' % (title, content))
...
title: Chapter 1; content: Welcome to Chapter 1
title: Chapter 2; content: Welcome to Chapter 2

Try the following code as a starter:

#!python3

import re
import xml.etree.ElementTree as ET

rex = re.compile(r'''(?P<title>Longitude
                       |Latitude
                       |date&time
                       |gsm\s+cell\s+id
                     )
                     \s*:?\s*
                     (?P<value>.*)
                     ''', re.VERBOSE)

root = ET.Element('root')
root.text = '\n'    # newline before the celldata element

with open('cell.txt') as f:
    celldata = ET.SubElement(root, 'celldata')
    celldata.text = '\n'    # newline before the collected element
    celldata.tail = '\n\n'  # empty line after the celldata element
    for line in f:
        # Empty line starts new celldata element (hack style, uggly)
        if line.isspace():
            celldata = ET.SubElement(root, 'celldata')
            celldata.text = '\n'
            celldata.tail = '\n\n'

        # If the line contains the wanted data, process it.
        m = rex.search(line)
        if m:
            # Fix some problems with the title as it will be used
            # as the tag name.
            title = m.group('title')
            title = title.replace('&', '')
            title = title.replace(' ', '')

            e = ET.SubElement(celldata, title.lower())
            e.text = m.group('value')
            e.tail = '\n'

# Display for debugging            
ET.dump(root)

# Include the root element to the tree and write the tree
# to the file.
tree = ET.ElementTree(root)
tree.write('cell.xml', encoding='utf-8', xml_declaration=True)

It displays for your example data:

<root>
<celldata>
<latitude>23.1100348</latitude>
<longitude>72.5364922</longitude>
<datetime>30:August:2014 05:04:31 PM</datetime>
<gsmcellid>4993</gsmcellid>
</celldata>

<celldata>
<latitude>23.1120549</latitude>
<longitude>72.5397988</longitude>
<datetime>30:August:2014 05:04:34 PM</datetime>
<gsmcellid>4993</gsmcellid>
</celldata>

</root>

Update for the wanted neigbour list:

#!python3

import re
import xml.etree.ElementTree as ET

rex = re.compile(r'''(?P<title>Longitude
                       |Latitude
                       |date&time
                       |gsm\s+cell\s+id
                       |Neighboring\s+List-\s+Lac\s+:\s+Cid\s+:\s+RSSI
                     )
                     \s*:?\s*
                     (?P<value>.*)
                     ''', re.VERBOSE)

root = ET.Element('root')
root.text = '\n'    # newline before the celldata element

with open('cell.txt') as f:
    celldata = ET.SubElement(root, 'celldata')
    celldata.text = '\n'    # newline before the collected element
    celldata.tail = '\n\n'  # empty line after the celldata element
    for line in f:
        # Empty line starts new celldata element (hack style, uggly)
        if line.isspace():
            celldata = ET.SubElement(root, 'celldata')
            celldata.text = '\n'
            celldata.tail = '\n\n'
        else:
            # If the line contains the wanted data, process it.
            m = rex.search(line)
            if m:
                # Fix some problems with the title as it will be used
                # as the tag name.
                title = m.group('title')
                title = title.replace('&', '')
                title = title.replace(' ', '')

                if line.startswith('Neighboring'):
                    neighbours = ET.SubElement(celldata, 'neighbours')
                    neighbours.text = '\n'
                    neighbours.tail = '\n'
                else:
                    e = ET.SubElement(celldata, title.lower())
                    e.text = m.group('value')
                    e.tail = '\n'
            else:
                # This is the neighbour item. Split it by colon,
                # and set the attributes of the item element.
                item = ET.SubElement(neighbours, 'item')
                item.tail = '\n'

                lac, cid, rssi = (a.strip() for a in line.split(':'))
                item.attrib['lac'] = lac
                item.attrib['cid'] = cid
                item.attrib['rssi'] = rssi.split()[0] # dBm removed

# Include the root element to the tree and write the tree
# to the file.
tree = ET.ElementTree(root)
tree.write('cell.xml', encoding='utf-8', xml_declaration=True)

Update for accepting empty line before neighbours -- also better implementation for general purposes:

#!python3

import re
import xml.etree.ElementTree as ET

rex = re.compile(r'''(?P<title>Longitude
                       |Latitude
                       |date&time
                       |gsm\s+cell\s+id
                       |Neighboring\s+List-\s+Lac\s+:\s+Cid\s+:\s+RSSI
                     )
                     \s*:?\s*
                     (?P<value>.*)
                     ''', re.VERBOSE)

root = ET.Element('root')
root.text = '\n'    # newline before the celldata element

with open('cell.txt') as f:
    celldata = ET.SubElement(root, 'celldata')
    celldata.text = '\n'    # newline before the collected element
    celldata.tail = '\n\n'  # empty line after the celldata element
    status = 0              # init status of the finite automaton
    for line in f:
        if status == 0:     # lines of the heading expected
            # If the line contains the wanted data, process it.
            m = rex.search(line)
            if m:
                # Fix some problems with the title as it will be used
                # as the tag name.
                title = m.group('title')
                title = title.replace('&', '')
                title = title.replace(' ', '')

                if line.startswith('Neighboring'):
                    neighbours = ET.SubElement(celldata, 'neighbours')
                    neighbours.text = '\n'
                    neighbours.tail = '\n'
                    status = 1  # empty line and then list of neighbours expected
                else:
                    e = ET.SubElement(celldata, title.lower())
                    e.text = m.group('value')
                    e.tail = '\n'
                    # keep the same status

        elif status == 1:   # empty line expected
            if line.isspace():
                status = 2  # list of neighbours must follow
            else:
                raise RuntimeError('Empty line expected. (status == {})'.format(status))
                status = 999 # error status

        elif status == 2:   # neighbour or the empty line as final separator

            if line.isspace():
                celldata = ET.SubElement(root, 'celldata')
                celldata.text = '\n'
                celldata.tail = '\n\n'
                status = 0  # go to the initial status
            else:
                # This is the neighbour item. Split it by colon,
                # and set the attributes of the item element.
                item = ET.SubElement(neighbours, 'item')
                item.tail = '\n'

                lac, cid, rssi = (a.strip() for a in line.split(':'))
                item.attrib['lac'] = lac
                item.attrib['cid'] = cid
                item.attrib['rssi'] = rssi.split()[0] # dBm removed
                # keep the same status

        elif status == 999: # error status -- break the loop
            break

        else:
            raise LogicError('Unexpected status {}.'.format(status))
            break

# Display for debugging
ET.dump(root)

# Include the root element to the tree and write the tree
# to the file.
tree = ET.ElementTree(root)
tree.write('cell.xml', encoding='utf-8', xml_declaration=True)

The code implements so called finite automaton where the status variable represents its current status. You can visualize it using pencil and paper -- draw small circles with the status numbers inside (called nodes in the graph theory). Being at the status, you allow only some kind of input (line). When the input is recognized, you draw the arrow (oriented edge in the graph theory) to another status (possibly to the same status, as a loop returning back to the same node). The arrow is annotated `condition | action'.

The result may look complex at the beginning; however, it is easy in the sense that you can always focus ony on the part of the code that belongs to certain status. And also, the code can be easily modified. However, finite automatons have limited power. But they are just perfect for this kind of problems.

One way to achieve this is to use XSLT Transformation. Most programming languages including Python will have support to convert an XML document into another document (e.g. HTML) when supplied with an XSL.

A good tutorial on XSLT Transformation can be found here

Use of Python to achieve transformation (once an XSL is prepared) is described here

Just read the data as string (or bytes if you want) and write it out as a different extension...

with open('myfile.xml', 'r') as file_in, open('myfile.txt', 'w') as file_out:
    data = file_in.read()
    file_out.write(data)

Or if you really just want to change the current file's extension:

import os
os.rename('myfile.xml','myfile.txt')

You can write a script with pure Python 3. These modules can help you:

• xml.etree.ElementTree
• base64

As mentioned in the comment, to decode the value of content, you need to remove all the 
 first, which seem to be carriage returns as HTML entities.