The Assertion (A) states: "Ascending limb of loop of Henle is impermeable to water and allows transport of electrolytes actively or passively." This is true. The ascending limb of the loop of Henle is indeed impermeable to water. This means that as the filtrate passes through this part of the loop, water cannot pass out of the tubule and back into the body, but electrolytes (like sodium and chloride ions) can be transported out, either actively (using energy) or passively (without using energy, following their concentration gradient).

The Reason (R) states: "Dilution of filtrate takes place due to efflux of electrolytes in the medullary fluid." This is also true. As the filtrate ascends the limb and electrolytes are transported out, the filtrate becomes more diluted. This is because the volume of the filtrate remains the same, but the number of electrolytes (which contribute to the filtrate's 'concentration') decreases.

Moreover, Reason (R) is explaining why the filtrate becomes dilute in the ascending limb, which is mentioned in Assertion (A). Therefore, (R) is indeed the correct explanation for (A).

So, the correct option is Option C: Both (A) and (R) are true and (R) is the correct explanation of (A).