Dear Reena,
What you practice is quite a general practice. This is to discourage employees from sandwiching the holidays and hence going on leave together.
In your case, if the person has applied for leave from 30th April till 2nd May and is to resume on 3rd May, the leave is for 3 days - 30th April, 1st May, and 2nd May.
If the person is applying for leave for 30th April and is to resume on 2nd May, I think only 1 leave for 30th April is to be deducted as 1st May was a holiday.
So, if there are any holidays in between the leaves taken, the holiday is considered as part of the leaves. The same thing is validated in the Bombay Shops and Establishment Act as well.
Regards.