In this paper, we propose an interaction based projection display system, which enables an infrared pen touch interaction on flat surface (e.g. walls, whiteboard, tables), with a webcam (with an infrared filter removed) and a projector. The challenge of infrared pen touch detection is to sense the touching and movement information of an infrared pen on the surface just from the 2-dimensional image captured by the webcam. In our method, the content of a computer is projected on the surface and the user interacts with the surface using an infrared pen, the movement of an infrared pen is captured by the webcam. Here, the infrared LED light act as a tracking point which helps in controlling the content projected on surface. The proposed method is performed in three stages: 1) the infrared pen LED image is captured and tracked using webcam 2) the calibration of webcam-projector setup is done by principle of Homography 3) the tracked coordinates or location of Infrared pen LED is mapped to computer cursor. By this way, movement of infrared pen allows user to control computer content projected on the surface.