this one helps. What do you see, if you put an ls in your script.sh? That's the starting point for evaluating relative paths. Usually it's your current working directory. So to answer your question: It's probably neither script.sh's nor file1's location. Why probably? Because it depends on what you do in your script. If you execute an cd /home/ in script.sh, the include path changes.
Python: executing shell script with arguments(variable), but argument is not read in shell script