So question is where should i place the file to store the favorites of a user? ... any
It's a matter of preference. I usually store things under /conf. For Shoutcast, for instance, I store the last 4 played stations in a variable in /conf/config (| separated list). For other plugins I use independent files.
Shunte, on the other hand, likes to use attached storage to store configuration/preferences. He has built a function that will return the first available USB storage, with fallback to /conf if no USB is available. His solution is the most scalable, since in the future we might run out of space in /conf. The downside to his approach is - if the user replaces the disk he looses that file.
The best approach would be to let the user configure the location of the file via a config variable (something like INDIANMUSIC_FAVORITES='/tmp/mnt/xxxx-xxxx/indian_music_favorites.xml'). You can set it by default to a reasonable default (e.g. /conf/), and allow the users to store their preferences wherever they want. Cantio, Daily Podcasts and other plugins use this approach.