Your blue tank image doesn't have a collision mask, so there's no way for the M&K object to know if the mouse is over a tank when you click it, or for your units to know if they're overlapping each other.
To add a collision mask, open up your blue tank sprite; now click on the "Collision mask" button on the top toolbar(it's the green icon second from the right) - As you can see, the collision mask is empty; now, just fill in the area with a solid color for the collision mask and you have working collisions again! Just press the "Collision mask" button again to close the editor for it.
Hope that helps ya.