Steps to reproduce:
1. draw something
2. Select Image->Rotate->Right 90 degrees. The icon for this choice is indicating a 90 degree left rotate, but ignore that.
3. Watch how the image itself is not rotated, but the boundaries for the image are. The lower part of the non-rotated image is colored with red. It looks like a mask.
4. Undo the rotation of the image and watch how the whole image gets red. The red looks like a mask.
5. Paint some on the red, and you'll see that you can reveal the image you wanted to rotate while painting over it.
6. Play with the zoom-control in the lower right and observe that the red mask disappears.
7. Try Image->Rotate-180 as well, and you'll see that it's not working either; it does nothing.
Expected behavior is to be able to rotate the image.
krita, xorg and kernel:
krita-kde4 1:1.9.96.0~svn757194-1ubuntu2 a pixel-based image manipulation program for the KDE Office Suite
xorg 1:7.3+10ubuntu3 X.Org X Window System
2.6.24-5-generic
I can confirm this behaviour