TDS on Technical Know-how from Foreign Co

A Pvt. Ltd. Co. is making payment to German Co. as a lumpsum royalty for Technical Know How.
According to German DTAA, tax is to we withheld @ 10%.
But according to Section 206AA we need to deduct tax @ 20%.
 

 
1. Will Section 206AA override German DTAA? Do we need to add EC & SHEC to the same? ( sec 206AA is independent and related to panel deduction @ 20% for non PAN cases, EC & SHEC is above the TDS Rate payable) 
2. If the German Co. applies for PAN, then will it need to comply with Return filing & Auditing provisions? Total payment to be made is 125,000 EUROS.

( as the country is under DTTA, so they dont have to file return in india- more experts can enlight the issue better)

 

Please put your arguments supporting your views. Reply urgently.

Thanks in advance