Unfortunately had to answer my own question,
Simple Answer: NO, You cannot update xcode installed from another account.
Solution is to delete the existing installation and re-installing from new account.
To delete the existing installation, you need to delete it from Launch pad. You can do this by locating xcode icon in launch pad, long click on the icon till it starts dancing. Then delete it and wait for a while till the xcode.app is deleted from /Application. If you manually delete xcode.app from /Application, App store will continue to think its installed and will not allow you to reinstall in future.
Above solution is assuming you have installed xcode from the mac app store, usually versions later than 4.2. For earlier versions, just deleting /Application/xcode folder should work.